Market Structure and Innovation

Loury, Glenn C.

doi:10.2307/1883165

Cited by 973 publications

(474 citation statements)

References 9 publications

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“…In a patent race, firms compete to be the first to achieve a specific invention and to obtain a patent on it (cf. Dasgupta and Stiglitz, 1980;Loury, 1979;Reinganum, 1982). In a patent arms race, in contrast, firms compete for the largest patent portfolio.…”

Section: Introductionmentioning

confidence: 99%

Offensive Patent Portfolio Races

Jell¹,

Henkel²,

Wallin³

2017

Long Range Planning

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In a patent portfolio race, firms attempt to assemble a large collection of patents. Traditional explanations for patent portfolio races rest on an assumption of fragmented patent ownership where multiple unknown firms employ defensive strategies to forestall holdup. However, patent portfolio races can be observed when patent ownership is concentrated to the hands of a few firms. To explore patent portfolio races under conditions of concentrated ownership we turn to the newspaper printing machine industry, an industry characterized by a few dominant firms. Using multiple sources -patent analysis, archival data, and interviews -we identify antecedents to a phenomenon we label offensive patent portfolio races. Contrary to received wisdom, we find that patent portfolio races can be offensive, aimed at gaining rather than avoiding loss of competitive advantage. Offensive patent portfolio races hinge on the breakdown of cooperation -triggered by changes in the perceived benefits, effectiveness, and/or costs of patents, partly mediated by the adoption of a gain frame towards increased patenting, and regulated by the potential losses from further increases. We explain the behavior by invoking the folk theorem in game theory and conclude that while triggering offensive patent portfolio races may yield temporary advantages, managers are advised to tread carefully as offensive patent portfolio races may have severe implications for the effectiveness and efficiency of the innovation process.Keywords: Patent strategy, motives to patent, intellectual property, patent thickets Acknowledgments: The authors are especially grateful to Rosemarie Ziedonis, Arvids Ziedonis, Rebecca Eisenberg, Dietmar Harhoff, and members of the strategy department at Stephen M. Ross School of Business for providing valuable comments on our study. We are indebted to the Editor of Long Range Planning, Gianvito Lanzolla, and two anonymous referees for numerous suggestions that greatly improved the paper. We furthermore thank participants at various conferences for valuable comments.

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Section: Introductionmentioning

confidence: 99%

Offensive Patent Portfolio Races

Jell¹,

Henkel²,

Wallin³

2017

Long Range Planning

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“…Seminal developments of this idea are Loury (1979), Lee and Wilde (1980), Dasgupta and Stiglitz (1980), and the evolutionary theory of Nelson and Winter (1982). Early researchers developed the 'Schumpeterian hypotheses' to translate Schumpeter's verbal arguments into empirically testable relationships.…”

Section: Introductionmentioning

confidence: 99%

Cost reduction, entry, and the interdependence of market structure and economic growth

Peretto

1999

Journal of Monetary Economics

138

109

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I study the joint determination of market structure and growth in an oligopolistic economy. Firms run in-house R&D programs to produce over time a continuous flow of cost-reducing innovations. In symmetric equilibrium, the relation between market structure and growth has two aspects. First, a larger number of firms induces fragmentation of the market and dispersion of R&D resources. This prevents exploitation of scale economies internal to the firm and slows down growth. Second, the number of firms changes with market and technology conditions and is endogenous. In particular, R&D spending is a fixed cost and there is a negative feed-back of the rate of growth on the number of firms. The explicit consideration of the interdependence of market structure and growth identifies a fundamental trade-off between growth and variety that produces interesting results. For example, the scale effect is bounded from above and converges to zero when the number of firms is large. Moreover, the market grows too little and supplies too much variety. The inefficiency is not due to technological externalities but to oligopolistic pricing and the interaction between R&D and entry decisions.

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“…This literature starts with Loury [19] and Lee and Wilde [20] ( [21] surveys the early contributions). Patent race models examine, in essence, the time it takes for a cost-saving innovation to be completed.…”

Section: ]mentioning

confidence: 99%

Research and Development Cooperatives and Market Collusion: A Global Dynamic Approach

Hinloopen

Smrkolj

Wagener

2017

J Optim Theory Appl

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We present a continuous-time generalization of the seminal research and development model of d'Aspremont and Jacquemin (Am Econ Rev 78(5): [1133][1134][1135][1136][1137] 1988) to examine the trade-off between the benefits of allowing firms to cooperate in research and the corresponding increased potential for product market collusion. We show the existence of a solution to the optimal investment problem using a combination of results from viscosity theory and the theory of planar dynamical systems. In particular, we show that there is a critical level of marginal cost at which firms are indifferent between doing nothing and starting to develop the technology. We find that colluding firms develop further a wider range of initial technologies, pursue innovations more quickly, and are less likely to abandon a technology. Product market collusion could thus yield higher total surplus.

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Market Structure and Innovation

Cited by 973 publications

References 9 publications

Offensive Patent Portfolio Races

Offensive Patent Portfolio Races

Cost reduction, entry, and the interdependence of market structure and economic growth

Research and Development Cooperatives and Market Collusion: A Global Dynamic Approach

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