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Competition and the negative expected social value of cost‐reducing innovation

Anzhou Zhang

Manchester School, 2022, vol. 90, issue 1, 59-76

Abstract: I study an R&D race among outside entities to a cost‐reducing innovation of a certain magnitude and the subsequent patent licensing by the winner. The target is to study whether the expected social value of the innovation is positive or not. Sufficient conditions under which it is negative or positive are provided. I also find non‐monotonic effects of the innovation's magnitude and the number of incumbent firms on the expected social value.

Date: 2022
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