Appropriability, patents, and rates of innovation in complex products industries

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in April 2009Abstract The economic theory of intellectual property rights is based on a rather narrow view of both competition and technological knowledge. We suggest some ways of enriching this framework with a more empirically grounded view of both and, by means of a simulation model, we analyze the impact of different property right regimes on the dynamics of a complex product industry, that is an industry where products are complex multi-component objects and competition takes place mainly through differentiation and component innovation. We show that, as the complexity of the product spaces increases, stronger patent regimes yield lower rates of innovation, lower product quality and lower consumers' welfare.

Technical Change and Industrial Dynamics as Evolutionary Processes

“…Further empirical evidence on the negative effects of strong patent protection on technological progress is in Mazzoleni and Nelson (1998); and at a more theoretical level, see the insightful discussion in Winter (1993) showing how tight appropriability regimes in evolutionary environments might deter technical progress (cf. also the formal explorations in Marengo et al, 2009). Conversely, well before the contemporary movement of 'open source' software, one is able to document cases in which groups of competing firms or private investors, possibly because of some awareness of the anti-commons problem, have preferred to avoid claiming patents and, on purpose, to operate in a weak IPR regime somewhat similar to that of open science, involving the free disclosure of inventions to one another: see Allen (1983) and Nuvolari (2004) on blast furnaces and the Cornish pumping engine, respectively.…”

Evolving user needs and late-mover advantage

“…First movers may also be able to protect their product technology—for example, through patenting some of its component technologies—raising even higher the barriers to entry for late movers. Patents are particularly effective in securing industry leadership in complex product industries, as technological substitutes are more difficult to integrate in complex products than in more modular products ( Marengo et al, 2012 ). Finally, first movers also may benefit from economies of scale in doing R&D. As the firm size of first movers tends to exceed the size of late movers at the time the latter enters the market, first movers can spread the sunken investments in R&D over a larger number of items than late movers ( Klepper, 1996 ).…”

Innovation, Technical Change, and Patents in the Development Process: A Long-Term View1

“…Further empirical evidence on the negative effects of strong patent protection on technological progress is in Mazzoleni and Nelson (1998a); and at a more theoretical level, see the insightful discussion in Winter (1993) showing how tight appropriability regimes in evolutionary environments might deter technical progress (cf. also the formal explorations in Marengo et al, 2009).…”