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How Much Should Society Fuel the Greed of Innovators? On the Relations between Appropriability, Opportunities and Rates of Innovation

  • Giovanni Dosi
  • Luigi Marengo
  • Corrado Pasquali

The paper attempts a critical assessment of both the theory and the empirical evidence on the role of appropriability and in particular of Intellectual Property Right (IPR) as incentives for technological innovation. We start with a critical discussion of the standard justification of the attribution of IPR in terms of "market failures" in knowledge generation. Such an approach we argue misses important features of technological knowledge and also neglects the importance of non-market institutions in the innovation process. Next, we examine the recent changes in the IPR regimes and their influence upon both rates of patenting and underlying rates of innovation. The evidence broadly suggests that, first, IPRs are not the most important device apt to "profit from innovation"; and second, they have at best no impact, or possibly even a negative impact on the underlying rates of innovation. Rather, we argued, technology- and industry-specific patterns of innovation are primarily driven by the opportunities associated with each technological paradigm. Conversely, firm-specific abilities to seize them and "profit from innovation" depend partly on adequacy of the strategic combinations identified by the taxonomy of Teece (1986) and partly on idiosyncratic capabilities embodied in the various firms.

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Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2006/17.

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Date of creation: 22 Jul 2006
Date of revision:
Handle: RePEc:ssa:lemwps:2006/17
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  1. Wesley M Cohen & Richard R Nelson & John P Walsh, 2003. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (Or Not)," Levine's Working Paper Archive 618897000000000624, David K. Levine.
  2. Klevorick, Alvin K. & Levin, Richard C. & Nelson, Richard R. & Winter, Sidney G., 1995. "On the sources and significance of interindustry differences in technological opportunities," Research Policy, Elsevier, vol. 24(2), pages 185-205, March.
  3. Teece, David J., 1993. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 22(2), pages 112-113, April.
  4. Samuel Kortum & Josh Lerner, 1997. "Stronger Protection or Technological Revolution: What is Behind the Recent Surge in Patenting?," NBER Working Papers 6204, National Bureau of Economic Research, Inc.
  5. Josh Lerner, 2003. "150 Years of Patent Protection," Levine's Working Paper Archive 618897000000000587, David K. Levine.
  6. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science.
  7. Petra Moser, 2003. "How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World Fairs," NBER Working Papers 9909, National Bureau of Economic Research, Inc.
  8. Dosi, Giovanni, 1993. "Technological paradigms and technological trajectories : A suggested interpretation of the determinants and directions of technical change," Research Policy, Elsevier, vol. 22(2), pages 102-103, April.
  9. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
  10. Giovanni Dosi & Luigi Orsenigo & Mauro Sylos Labini, 2002. "Technology and the Economy," LEM Papers Series 2002/18, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  11. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-18, December.
  12. Bronwyn H. Hall, 2004. "Exploring the Patent Explosion," NBER Working Papers 10605, National Bureau of Economic Research, Inc.
  13. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
  14. Jaffe, Adam B., 2000. "The U.S. patent system in transition: policy innovation and the innovation process," Research Policy, Elsevier, vol. 29(4-5), pages 531-557, April.
  15. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  16. Edwin Mansfield, 1986. "Patents and Innovation: An Empirical Study," Management Science, INFORMS, vol. 32(2), pages 173-181, February.
  17. Rosemarie Ham Ziedonis, 2004. "Don't Fence Me In: Fragmented Markets for Technology and the Patent Acquisition Strategies of Firms," Management Science, INFORMS, vol. 50(6), pages 804-820, June.
  18. Nancy T. Gallini, 2002. "The Economics of Patents: Lessons from Recent U.S. Patent Reform," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 131-154, Spring.
  19. Merges, Robert P. & Nelson, Richard R., 1994. "On limiting or encouraging rivalry in technical progress: The effect of patent scope decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 25(1), pages 1-24, September.
  20. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1988. "Appropriating the Returns from Industrial R&D," Cowles Foundation Discussion Papers 862, Cowles Foundation for Research in Economics, Yale University.
  21. Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January.
  22. Horstmann, Ignatius & MacDonald, Glenn M & Slivinski, Alan, 1985. "Patents as Information Transfer Mechanisms: To Patent or (Maybe) Not to Patent," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 837-58, October.
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