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Sequential Product Innovation, Competition and Patent Policy

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  • George Norman
  • Lynne Pepall
  • Dan Richards

Abstract

This paper examines the role of patent policy in a spatial model of sequential innovation. Initial entrepreneurs develop a new product market and anticipate that subsequent innovation may lead to a product line that consumers value more highly. The likelihood of sequential innovation increases with the number of initial early entrants in the market. Patent protection that encourages early entry can therefore raise the probability of both initial and subsequent innovation. We determine the optimal patent breadth as a function of key industry characteristics of both consumer taste and the new technology.

Suggested Citation

  • George Norman & Lynne Pepall & Dan Richards, 2014. "Sequential Product Innovation, Competition and Patent Policy," Discussion Papers Series, Department of Economics, Tufts University 0786, Department of Economics, Tufts University.
    • Handle: RePEc:tuf:tuftec:0786
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    File URL: http://ase.tufts.edu/economics/documents/papers/2014/sequentialInnovation.pdf
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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