Sequential innovation, patents, and imitation
By: James Bessen [and] Eric Maskin
Contributors: Maskin, Eric; Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper / Dept. of Economics -- 00-01; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 00-01.
Publisher: Dept. of Economics, Massachusetts Institute of Technology
Published: 2000
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 39
Description: How could such industries as software, semiconductors, and computers have been so innovative despite historically weak patent protection? We argue that if innovation is both sequential and complementary--as it certainly has been in those industries--competition can increase firms' future profits thus offsetting short-term dissipation of rents. A simple model also shows that in such a dynamic industry, patent protection may reduce overall innovation and social welfare. The natural experiment that occurred when patent protection was extended to software in the 1980's provides a test of this model. Standard arguments would predict that R&D intensity and productivity should have increased among patenting firms. Consistent with our model, however, these increases did not occur. Other evidence supporting our model includes a distinctive pattern of cross-licensing in these industries and a positive relationship between rates of innovation and firm entry. JEL Classification: O31, O34.
Notes: Title from cover.

"January 2000."; "11/99"--Abstract.

Includes bibliographical references (p. 26-28).

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.