Effect of piracy on innovation in the presence of network externalities

Dyuti Banerjee

Economic Modelling, 2013, vol. 33, issue C, 526-532

Abstract: This paper analyzes the impact of simultaneous increases in piracy (piracy effect) and network externalities (network effect) on R&D investment. A single firm's R&D investment increases (or decreases) if the network effect (or piracy effect) is dominant. With R&D competition, if the firms “significantly” differ with respect to their R&D efficiencies and if the piracy effect dominates the network effect then the less efficient firm's R&D investment increases and that of the more efficient firm's decreases. In this case, the overall probability of successful innovation increases. The reverse holds if the network effect dominates the piracy effect. If the firms are “less” asymmetric then their R&D investment either increases or decreases depending on the relative strengths of the piracy and network effects.

Keywords: Innovation; Market uncertainty; Network effect; Piracy effect; Technological uncertainty (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 L21 L26 O3 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:33:y:2013:i:c:p:526-532

DOI: 10.1016/j.econmod.2013.04.004

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