Incumbency and R&D incentives: Licensing the gale of creative destruction (original) (raw)

Licensing vs. Litigation: The Effect of the Legal System on Incentives to Innovate

Journal of Economics and Management Strategy, 1999

With uncertain scope of patent protection and imperfect enforcement, the effective strength of patent protection is determined by the legal system. We analyze how the legal system affects the incentives of firms to innovate, taking into account possibilities of strategic licensing and litigation to deter imitation. The legal system that guarantees the patentee's monopoly power maximizes the R & D intensities. However, the legal system that induces licensing provides incentives to exert R & D effort while preserving ex post efficiency. We also compare R & D, patent licensing, and litigation behavior under American and English rules of legal cost allocation.

Competition and Innovation

Journal of Industrial Organization Education, 2006

Which kind of intellectual property regime is more favorable to innovation: one that enforces patents or one that does not? Economic theory is unable to answer this question, as valid arguments can be made both for and against patents; hence we must turn to empirical evidence. In this paper, we review empirical evidence gathered by other researchers and add new evidence of our own. We conclude that the evidence suggests that patents do not promote innovation, but instead retard it.

Patents, imitation and licensing in an asymmetric dynamic R&D race

International Journal of Industrial Organization, 2010

R&D is an inherently dynamic process which typically involves different intermediate stages that need to be developed before the completion of the final invention. Firms are not necessarily symmetric in their R&D abilities; some may have an advantage in early stages of the R&D process while others may have advantages in other stages of the process. This paper uses a two-firm asymmetric-ability multistage R&D race model to analyze the effect of patents, imitations and licensing arrangements on the speed of innovation, firm value and consumers' surplus. By using numerical analyses to study the MPE of the R&D race, the paper demonstrates the circumstances under which a weak patent protection regime, which facilitates free imitation of any intermediate technology, may yield a higher consumers' surplus and total surplus than a regime that awards a patent for the final innovation. The advantage of imitation may hold even when we allow for voluntary licensing of intermediate technologies.

INCENTIVES TO INNOVATE IN OLIGOPOLIES

The Manchester School, 2011

In the spirit of Arrow (The Rate and Direction of Inventive Activity, Princeton, NJ, Princeton University Press, 1962), we examine, in an oligopoly model with horizontally differentiated products, how much a firm is willing to pay for a process innovation that it would be the only one to use. We show that different measures of competition (number of firms, degree of product differentiation, Cournot vs. Bertrand) affect incentives to innovate in non-monotonic, different and potentially opposite ways.

Intellectual property, technological regimes and market dynamics

Economia E Politica Industriale, 2005

This paper advances an argument in support of technology-specific tailoring of incentives to innovate. With a focus on patent incentives, the argument proceeds from the identification of the factors likely to have a bearing on (a) the differential role and effectiveness of patents ...

Does it Pay to Innovate First? A Dynamic Duopoly with R&D Spillovers

2004

We analyze a dynamic duopoly where fir m sh a v ei ne a c hp e r i o dt h e possibility to make a once-and-for-all R&D investment. The latter generates a cost saving innovation to the innovative firm and a spillover over the R&D investment cost of the non-innovative firm. We show, differently from D'Aspremont and Jacquemin [1988] where firms have an incentive to innovate immediately, that the spillover may induce a war of attrition equilibrium, where both firms would like the rival to innovate first. Last, by comparing the non-cooperative regime with the RJV case, we show that R&D cooperation may increase welfare even if the spillover is relatively small. JEL classification: O33, L13, L41

Essays on the Economics of Innovation

2016

The first part of this thesis studies the recent emergence of new actors in the market for patents, namely, non-practicing entities, who acquire patents with no aim to use them to produce a final good. On the one hand, patent assertion entities seek to acquire patents so as to monetize them through the threat of litigation for patent infringement. On the other hand, defensive aggregators acquire patents to provide safety from litigation brought by patent trolls to their affiliated firms. We analyze the strategic behavior of non-practicing entities in the patent acquisition process and highlight patent assertion entities' greater ability to preempt patents as compared to producing firms. Then, we examine the effectiveness of defensive aggregators to protect firms against litigation brought by patent assertion entities. Finally, the last part instead studies the effects of one-way spillovers in the context of non-tournament models of R&D in which ex-ante identical firms engage in ...

Inventions under Siege? The Impact of Technology Competition on Licensing

SSRN Electronic Journal, 2000

In recent years, firms have increasingly contributed to and been confronted with a patent landscape characterized by numerous but marginal inventions, overlapping claims and patent fences. Literature suggests that both the fragmentation of ownership and the threat of a firm's patent applications being blocked by competitors' patents lead to increased patenting and inlicensing activity. In this paper, we investigate the effect of expected blocking on firms' engagement in in-and out-licensing. Based on a sample of more than 400 German manufacturing firms our results show that firms engage in in-and out-licensing if technology competition increases which is in line with the argument that licensing can mitigate hold-up problems in technology markets.