Innovation, Diffusion and Intellectual Property Rights

Zhu Wang

Richmond Fed Economic Brief, 2023, vol. 23, issue 23

Abstract: Our recent working paper studies innovation and diffusion of technology along an industry's evolution and characterizes how diffusion affects the incentives to innovate. In our analysis, firms participate in a competitive industry and face production capacity constraints. The entry of imitators thus increases industry supply and is socially beneficial to a degree. We show that, from the social welfare point of view, innovators should be compensated for intellectual property rights to internalize their knowledge spillovers to imitators. However, such compensation should be only partial due to the congestion externality in the meetings between innovators and imitators where idea diffusion takes place.

Keywords: innovation; diffusion; technology adoption; incentives (search for similar items in EconPapers)
Date: 2023
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