Patent Protection, Optimal Licensing, and Innovation with Endogenous Entry
MPRA Paper from University Library of Munich, Germany
How does patent policy affect innovation when patent licensing is crucial for firms? To address this question, the present paper incorporates voluntary patent licensing between an innovator and followers, which has been discussed in the literature of industrial organization, into a dynamic general equilibrium model. Unlike in existing studies, both the licensing fee and the number of licensees are endogenously determined by the innovator’s maximization and the free-entry condition. Using this model, we show that strong patent protection does not enhance innovation, economic growth, and welfare. Furthermore, the extended analysis provides a policy implication that the effect of patent policy depends on how difficult further innovation is without patent licensing of the current leading technology.
Keywords: innovation; patent protection; optimal patent licensing; endogenous market structure. (search for similar items in EconPapers)
JEL-codes: L24 O31 O34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ent, nep-ind, nep-ino, nep-ipr, nep-law, nep-mic and nep-sbm
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