Imitation and the diffusion of innovation

Debi Prasad Mohapatra and Vatsala Shreeti

No 1344, BIS Working Papers from Bank for International Settlements

Abstract: Why would a market leader choose not to patent an innovation? We study Samsung's decision to forgo patent protection for dual SIM technology in the Indian mobile handset market. Using a structural model of demand and supply estimated on quarterly product-level data from the Indian mobile handset industry, we document that rival firms' dual SIM products generated a preference discovery externality. Rival firms' widespread adoption of the dual SIM technology allowed consumers to discover the value of the technology, also benefiting Samsung itself. Counterfactual simulations show that a patent would have suppressed this externality, reducing Samsung's equilibrium profits despite holding monopoly rights. Voluntary non-patenting was therefore privately optimal. Our findings shed light on wider debates about open-sourcing in software and other markets.

Keywords: innovation; patenting; telecom; preference discovery (search for similar items in EconPapers)
JEL-codes: L13 L63 O33 O34 (search for similar items in EconPapers)
Date: 2026-04
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