Innovate AND Imitate ?: Dynamic Innovation, Patents, and Costly Imitation

Jorge Andrés Ferrando Yanez
Additional contact information
Jorge Andrés Ferrando Yanez: Crest

No 2003-31, Working Papers from Center for Research in Economics and Statistics

Abstract: We build a continuous time dynamic model of sequential innovation with stochastic imitationin which firms can simultaneously undertake original and imitative R&D, to compare theperformance of (i) a system with patent protection (with or without licenses) and (ii) a systemwith costless full spillovers of innovation. We confirm previous findings that if innovation iscomplementary (i.e. chances of innovating increase with the number of firms, for a givenR&D expenditure) and sequential (i.e. innovations arrive one at a time), firms' profits mightincrease in the second scenario. However, we show that from a social perspective the tradeoffbetween socially costly (but more efficient) imitative R&D and welfare improvingreduction of innovators' ex post monopoly rents does not always balance in favour of weakpatents, and determine the conditions under which firms' preferences with regards to theintellectual property protection system coincide with social objectives. We also show that thepresence of patents in a context with endogenously determined stochastic imitation reducesthe socially optimal pace of original innovation, and interpret the observed cross-licensingagreements and weaker patent protection observed in relatively more dynamic industries asthe natural outcome of a dynamic R&D game.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://crest.science/RePEc/wpstorage/2003-31.pdf Crest working paper version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:crs:wpaper:2003-31

Access Statistics for this paper

More papers in Working Papers from Center for Research in Economics and Statistics Contact information at EDIRC.
Bibliographic data for series maintained by Secretariat General () and Murielle Jules Maintainer-Email : murielle.jules@ensae.Fr.