First mover advantages and optimal patent protection

F. Scherer ()

The Journal of Technology Transfer, 2015, vol. 40, issue 4, 559-580

Abstract: This paper examines the economic logic underlying so-called “first mover advantages” as alternatives to patent protection in allowing innovators protection from immediate imitation and time to recoup their research and development investments. These include a head start, lower costs due to learning by doing, and product-differentiating reputational advantages. William Nordhaus’ theory of optimal patent protection is extended to cases of product, as distinguished from cost-saving, innovation. Over the parameters covered by a simulation analysis, profit potentials sufficient to induce R&D investment are found much more frequently than R&D incentive failures. R&D failures occur most commonly in small markets and situations in which imitators’ erosion of the innovator’s market share is particularly rapid. Implications for patent policy are drawn. Copyright Springer Science+Business Media New York 2015

Keywords: Technological innovation; Intellectual property or patents; Product differentiation; O34 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jtecht:v:40:y:2015:i:4:p:559-580

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DOI: 10.1007/s10961-015-9394-y

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