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Patent Protection, Optimal Licensing, and Innovation with Endogenous Entry

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  • Suzuki, Keishun

Abstract

How does patent policy affect innovation when patent licensing is crucial for firms? To address this question, the present paper incorporates voluntary patent licensing between an innovator and followers, which has been discussed in the literature of industrial organization, into a dynamic general equilibrium model. Unlike in existing studies, both the licensing fee and the number of licensees are endogenously determined by the innovator’s maximization and the free-entry condition. Using this model, we show that strong patent protection does not enhance innovation, economic growth, and welfare. Furthermore, the extended analysis provides a policy implication that the effect of patent policy depends on how difficult further innovation is without patent licensing of the current leading technology.

Suggested Citation

  • Suzuki, Keishun, 2017. "Patent Protection, Optimal Licensing, and Innovation with Endogenous Entry," MPRA Paper 82712, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:82712
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    References listed on IDEAS

    as
    1. 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.
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    8. Suzuki, Keishun, 2017. "Competition, Patent Protection, and Innovation in an Endogenous Market Structure," MPRA Paper 77133, University Library of Munich, Germany.
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    13. Sakakibara, Mariko & Branstetter, Lee, 2001. "Do Stronger Patents Induce More Innovation? Evidence from the 1988 Japanese Patent Law Reforms," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 77-100, Spring.
    14. Simone Marsiglio & Marco Tolotti, 2018. "Endogenous growth and technological progress with innovation driven by social interactions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 293-328, March.
    15. 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.
    16. repec:wly:soecon:v:82:3:y:2016:p:809-825 is not listed on IDEAS
    17. Tatsuro Iwaisako & Koichi Futagami, 2003. "Patent Policy in an Endogenous Growth Model," Journal of Economics, Springer, vol. 78(3), pages 239-258, March.
    18. Chin-Sheng Chen, 2017. "Endogenous Market Structure and Technology Licensing," The Japanese Economic Review, Japanese Economic Association, vol. 68(1), pages 115-130, March.
    19. Yuandi Wang & Zhao Zhou & Jason Li-Ying, 2013. "The impact of licensed-knowledge attributes on the innovation performance of licensee firms: evidence from the Chinese electronic industry," The Journal of Technology Transfer, Springer, vol. 38(5), pages 699-715, October.
    20. Yi Qian, 2007. "Do National Patent Laws Stimulate Domestic Innovation in a Global Patenting Environment? A Cross-Country Analysis of Pharmaceutical Patent Protection, 1978-2002," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 436-453, August.
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    Cited by:

    1. Suzuki, Keishun, 2020. "Patent Puzzle, Inflation, and Internal Financial Constraint," MPRA Paper 101937, University Library of Munich, Germany.
    2. 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.
    3. Kishimoto, Shin & Suzuki, Keishun, 2021. "Growth and Welfare Effects of Interventions in Patent Licensing Negotiations," MPRA Paper 108009, University Library of Munich, Germany.

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    More about this item

    Keywords

    innovation; patent protection; optimal patent licensing; endogenous market structure.;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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