Intellectual Property Rights in a Quality-Ladder Model with Persistent Leadership

Abstract

This paper analyzes the effects of intellectual property rights in a quality-ladder model of endogenous growth in which incumbent firms preemptively innovate in order to keep their position of leadership. Unlike in models with leapfrogging, granting forward protection, and imposing a non-obviousness requirement reduces growth. In the main case where entrants and incumbents have free access to the same RD technology, infinite protection against imitation, granted independently of the size of the lead, maximizes growth. If entrants have to engage in costly catch up before they can undertake frontier RD, growth is maximal for a finite (expected) length of protection against imitation. AbstractThis article analyzes the effects of intellectual property rights in a qualityladder model of endogenous growth in which incumbent firms preemptively innovate in order to keep their position of leadership. Unlike in models with leapfrogging, granting forward protection, and imposing a non-obviousness requirement reduces growth. In the main case where entrants and incumbents have free access to the same R&D technology, infinite protection against imitation, granted independently of the size of the lead, maximizes growth. If entrants have to engage in costly catch up before they can undertake frontier R&D, growth is maximal for a finite (expected) length of protection against imitation. (JEL L40, O31, O34)

Sequential innovation, patent policy, and the dynamics of the replacement effect

“…The study of R&D incentives in the context of an infinite sequence of innovations has focused on stationary environments. Stationarity has been attained by assuming an exogenous arrival of innovations (Hopenhayn, Llobet, and Mitchell, ); by restricting the policy space to patents of infinite length (O'Donoghue, ; Acemoglu and Cao, ; Marshall and Parra, ) or to patents that terminate stochastically in a Poisson fashion (Acemoglu and Akcigit, ; Kiedaisch, ); by restricting investment in R&D to only potential followers (Hunt, ; Segal and Whinston, ); or by restricting R&D to only market leaders (Horowitz and Lai, ). Although these studies have emphasized the role of the replacement effect on the firms' R&D incentives, the standard stationarity assumption shuts down the dynamic incentives that exist throughout the patent life.…”

Effects of patents versus R&D subsidies on income inequality

“…The seminal studies in this literature are Romer (1990), Segerstrom et al (1990), Grossman and Helpman (1991) and Aghion and Howitt (1992). Subsequent studies in this literature apply variants of the R&D-based growth model to explore the e¤ects of patent protection and R&D subsidies on innovation and economic growth; 3 see for example Peretto (1998) Minniti and Venturini (2014) and Kiedaisch (2015). These studies focus on a representative-household framework and do not consider the distributional implications of patent protection and R&D subsidies.…”

FDI, IPR protection and export quality: an empirical analysis based on national data

“…There are two main findings. First, the perfect IPR protection is conducive to optimizing the structure of export products (Zhu and Fu, 2013; Zhou, 2014; Kiedaisch, 2015) and enhancing the technical quality of exports (Yang, 2015; Qi and Xu, 2012). Second, there is a U-shape (Ma and Li, 2015) or inverted U-shape (Lin, 2016; Dai, 2014) relationship between IPR protection and the level of export technology.…”