Are Patents Discouraging Innovation?

Soma Dey ()

No 382, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: The strengthening of the U.S. patent regime in the early eighties was followed by a sharp increase in patenting but did not change the R&D expenditure significantly in some industries in the U.S. This “patent paradox†is prominently observed in complex industries, like the semiconductor industry. In this paper I develop a model of invention and product development to examine the effects of a patent regime change on the patenting and R&D decisions of firms in complex industries. Firms in these industries have a greater need to access a large number of ideas to successfully develop an end product. I consider two different environment — one without licensing and one with licensing. While a stronger patent regime leads to higher patenting and R&D activities in both environments, the strategic complementarity between patenting and R&D is relatively weaker in the presence of licensing. A stronger patent regime change that creates incentives for firms to increase patenting activity, therefore, may not lead to a similar increase in R&D activity.

Keywords: Patents; patent regime; licensing; complex industries (search for similar items in EconPapers)
JEL-codes: L00 L24 O34 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed006:382

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