IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/77133.html

Competition, Patent Protection, and Innovation in an Endogenous Market Structure

Author

Listed:
  • Suzuki, Keishun

Abstract

This study revisits the relationship between competition and innovation by incorporating an endogenous market structure (EMS) in a dynamic general equilibrium model. We consider that both innovative and non-innovative followers engage in Cournot competition with free entry. A competition-enhancing policy, which reduces entry cost, can stimulate the entry of innovative followers when the entry cost is high. However, when the entry cost is sufficiently low, the entry of non-innovative followers crowd-out innovative followers from the market. As a result, there is a non-monotonic relationship (inverted-V shape) between competition and innovation. Furthermore, we show that, while strengthening patent protection positively affects innovation when competition is sufficiently intense, the effect may be negative under milder competition. This suggests that a competition policy could complement a patent policy.

Suggested Citation

  • Suzuki, Keishun, 2017. "Competition, Patent Protection, and Innovation in an Endogenous Market Structure," MPRA Paper 77133, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:77133
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/77133/1/MPRA_paper_77133.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/77458/1/MPRA_paper_77458.pdf
    File Function: revised version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/79381/1/MPRA_paper_79381.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    2. Furukawa, Yuichi, 2007. "The protection of intellectual property rights and endogenous growth: Is stronger always better?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3644-3670, November.
    3. Philippe Aghion & Peter Howitt & Susanne Prantl, 2015. "Patent rights, product market reforms, and innovation," Journal of Economic Growth, Springer, vol. 20(3), pages 223-262, September.
    4. Aamir Rafique Hashmi, 2013. "Competition and Innovation: The Inverted-U Relationship Revisited," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1653-1668, December.
    5. Pedro Bento, 2014. "Competition as a Discovery Procedure: Schumpeter Meets Hayek in a Model of Innovation," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(3), pages 124-152, July.
    6. Juan A. Correa & Carmine Ornaghi, 2014. "Competition & Innovation: Evidence from U.S. Patent and Productivity Data," Journal of Industrial Economics, Wiley Blackwell, vol. 62(2), pages 258-285, June.
    7. Blazsek, Szabolcs & Escribano, Alvaro, 2016. "Patent propensity, R&D and market competition: Dynamic spillovers of innovation leaders and followers," Journal of Econometrics, Elsevier, vol. 191(1), pages 145-163.
    8. Iwaisako, Tatsuro & Tanaka, Hitoshi & Futagami, Koichi, 2011. "A welfare analysis of global patent protection in a model with endogenous innovation and foreign direct investment," European Economic Review, Elsevier, vol. 55(8), pages 1137-1151.
    9. Cysne, Rubens P. & Turchick, David, 2012. "Intellectual property rights protection and endogenous economic growth revisited," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 851-861.
    10. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
    11. Futagami, Koichi & Iwaisako, Tatsuro, 2007. "Dynamic analysis of patent policy in an endogenous growth model," Journal of Economic Theory, Elsevier, vol. 132(1), pages 306-334, January.
    12. Daniel Garcia‐Macia & Chang‐Tai Hsieh & Peter J. Klenow, 2019. "How Destructive Is Innovation?," Econometrica, Econometric Society, vol. 87(5), pages 1507-1541, September.
    13. Theo Van De Klundert & Sjak Smulders, 1997. "Growth, Competition and Welfare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 99-118, March.
    14. Rod Falvey & Neil Foster & David Greenaway, 2006. "Intellectual Property Rights and Economic Growth," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 700-719, November.
    15. Christine Greenhalgh & Mark Rogers, 2010. "Innovation, Intellectual Property, and Economic Growth," Economics Books, Princeton University Press, edition 1, volume 0, number 9221.
    16. Keishun Suzuki, 2015. "Economic growth under two forms of intellectual property rights protection: patents and trade secrets," Journal of Economics, Springer, vol. 115(1), pages 49-71, May.
    17. Vincenzo Denicolò & Piercarlo Zanchettin, 2010. "Competition, Market Selection and Growth," Economic Journal, Royal Economic Society, vol. 120(545), pages 761-785, June.
    18. Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(3), pages 467-492.
    19. Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February.
    20. Angus C. Chu & Yuichi Furukawa & Lei Ji, 2016. "Patents, R&D subsidies, and endogenous market structure in a schumpeterian economy," Southern Economic Journal, Southern Economic Association, vol. 82(3), pages 809-825, January.
    21. Federico Etro & Andrea Colciago, 2010. "Endogenous Market Structures and the Business Cycle," Economic Journal, Royal Economic Society, vol. 120(549), pages 1201-1233, December.
    22. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April.
    23. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
    24. Ryo Horii & Tatsuro Iwaisako, 2007. "Economic Growth with Imperfect Protection of Intellectual Property Rights," Journal of Economics, Springer, vol. 90(1), pages 45-85, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Suzuki, Keishun, 2020. "Patent Protection, Optimal Licensing, And Innovation With Endogenous Entry," Macroeconomic Dynamics, Cambridge University Press, vol. 24(8), pages 2033-2059, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Keishun Suzuki, 2020. "Competition, patent protection, and innovation with heterogeneous firms in an endogenous market structure," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 729-750, June.
    2. Suzuki, Keishun, 2020. "Patent Protection, Optimal Licensing, And Innovation With Endogenous Entry," Macroeconomic Dynamics, Cambridge University Press, vol. 24(8), pages 2033-2059, December.
    3. Claude D'Aspremont & Rodolphe Dos Santos Ferreira & Louis‐André Gérard‐Varet, 2010. "Strategic R&D investment, competitive toughness and growth," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(3), pages 273-295, September.
    4. Angus C. Chu, 2022. "Patent policy and economic growth: A survey," Manchester School, University of Manchester, vol. 90(2), pages 237-254, March.
    5. Angus C. Chu & Yuichi Furukawa & Sushanta Mallick & Pietro Peretto & Xilin Wang, 2021. "Dynamic effects of patent policy on innovation and inequality in a Schumpeterian economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1429-1465, June.
    6. Aghion, Philippe & Akcigit, Ufuk & Howitt, Peter, 2014. "What Do We Learn From Schumpeterian Growth Theory?," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 515-563, Elsevier.
    7. Pedro Rui Mazeda Gil & Paulo Brito & Óscar Afonso, 2008. "A Model of Quality Ladders with Horizontal Entry," FEP Working Papers 296, Universidade do Porto, Faculdade de Economia do Porto.
    8. Muhammad Zeeshan Younas & Muhammad Iftikhar Husnain, 2022. "Role of market structure in firm-level innovation: an extended CDM model for a developing economy," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 49(1), pages 91-104, March.
    9. Iwaisako, Tatsuro, 2020. "Welfare Effects Of Patent Protection In A Semi-Endogenous Growth Model," Macroeconomic Dynamics, Cambridge University Press, vol. 24(3), pages 708-728, April.
    10. Rudra Narayan Kushwaha & Taniya Ghosh, 2023. "The Effects of population growth on patents and economic growth dynamics," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2023-05, Indira Gandhi Institute of Development Research, Mumbai, India.
    11. Angus C. Chu, 2024. "Macroeconomic effects of intellectual property rights: an updated survey," Chapters, in: Walter G. Park (ed.), Handbook of Innovation and Intellectual Property Rights, chapter 2, pages 13-26, Edward Elgar Publishing.
    12. Angus C. Chu & Yuichi Furukawa & Lei Ji, 2016. "Patents, R&D subsidies, and endogenous market structure in a schumpeterian economy," Southern Economic Journal, John Wiley & Sons, vol. 82(3), pages 809-825, January.
    13. Tatsuro Iwaisako, 2016. "Effects of Patent Protection on Optimal Corporate Income and Consumption Taxes in an R&D‐Based Growth Model," Southern Economic Journal, John Wiley & Sons, vol. 83(2), pages 590-608, October.
    14. Suzuki, Keishun, 2020. "Patent Puzzle, Inflation, and Internal Financial Constraint," MPRA Paper 101937, University Library of Munich, Germany.
    15. Sumiko Niwa, 2018. "Effects of a blocking patent on R&D with endogenous survival activities," Journal of Economics, Springer, vol. 125(3), pages 263-277, November.
    16. Cincera, Michele & Ince, Ela & Santos, Anabela, 2024. "Revisiting the innovation-competition nexus: Evidence from worldwide manufacturing and service industries," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 586-603.
    17. Tapio Palokangas, 2011. "Optimal patent length and breadth in an economy with creative destruction and non-diversifiable risk," Journal of Economics, Springer, vol. 102(1), pages 1-27, January.
    18. Harold Creusen & Björn Vroomen & Henry van der Wiel & Fred Kuypers, 2006. "Dutch retail trade on the rise? Relation between competition, innovation and productivity," CPB Document 137, CPB Netherlands Bureau for Economic Policy Analysis.
    19. Malte Mosel, 2009. "Competition, imitation, and R&D productivity in agrowth model with sector-specific patent protection," Working Papers 084, Bavarian Graduate Program in Economics (BGPE).
    20. Gil, Pedro Mazeda, 2010. "Stylised facts and other empirical evidence on firm dynamics, business cycle and growth," Research in Economics, Elsevier, vol. 64(2), pages 73-80, June.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:77133. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.