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Does intellectual property right promote innovations when pirates are innovators?

Sugata Marjit and Lei Yang

International Review of Economics & Finance, 2015, vol. 37, issue C, 203-207

Abstract: We identify two new channels through which Intellectual Property Rights (IPRs) may affect R&D incentives that are in stark contrast to conventional wisdom. First, in a model with a simple technology we find that IPRs may deter innovations when pirates are potential innovators. Second, in a model with a complex technology we find that IPR, even in a static situation, increases consumer surplus. We show that strong IPRs lead not only to the decrease in the “competition effect”, but also the increase in the “innovation effect” in the current period when there exists international specialization in R&D. When “innovation effect” dominates “competition effect”, the strengthening of patent protection promotes both innovation and consumer surplus.

Keywords: Intellectual Property Rights; R&D incentive of imitators (search for similar items in EconPapers)
JEL-codes: F14 L13 O1 O34 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.iref.2014.11.023

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