Entrepreneurial Innovation, Patent Protection and Industry Dynamics

Gerard Llobet and Javier Suarez

Working Papers from CEMFI

Abstract: We assess the effects of imitation and intellectual property (IP) protection in a model of industry dynamics in which the value of IP is eroded by further innovations and imitations. Innovations result from the development of ideas engendered by entrepreneurs. We find that innovation and welfare are decreasing in the protection of IP against further innovations, while their relationship with the protection against imitations typically has an inverted-U shape (partly because imitation reduces the resistance of incumbents to innovators). We also find that the welfare gains from increasing IP protection increase if entrepreneurs are financially constrained.

Date: 2010-02
New Economics Papers: this item is included in nep-com, nep-ent, nep-ino, nep-ipr, nep-pr~, nep-mic, nep-reg, nep-sbm and nep-tid
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