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Are Patents Discouraging Innovation?


  • Soma Dey

    () (Department of Business Policy National University of Singapore)


The strengthening of the U.S. patent regime in the early eighties was followed by a sharp increase in patenting but did not change the R&D expenditure significantly in some industries in the U.S. This “patent paradox†is prominently observed in complex industries, like the semiconductor industry. In this paper I develop a model of invention and product development to examine the effects of a patent regime change on the patenting and R&D decisions of firms in complex industries. Firms in these industries have a greater need to access a large number of ideas to successfully develop an end product. I consider two different environment — one without licensing and one with licensing. While a stronger patent regime leads to higher patenting and R&D activities in both environments, the strategic complementarity between patenting and R&D is relatively weaker in the presence of licensing. A stronger patent regime change that creates incentives for firms to increase patenting activity, therefore, may not lead to a similar increase in R&D activity.

Suggested Citation

  • Soma Dey, 2006. "Are Patents Discouraging Innovation?," 2006 Meeting Papers 382, Society for Economic Dynamics.
  • Handle: RePEc:red:sed006:382

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    References listed on IDEAS

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    More about this item


    Patents; patent regime; licensing; complex industries;

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • 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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