Title
(When) Do stronger patents increase continual innovation?
Document Type
Journal article
Source Publication
Journal of Economic Behavior & Organization
Publication Date
2-1-2014
Volume
98
First Page
115
Last Page
124
Publisher
Elsevier BV
Keywords
Continual innovation, Patent strength, Patents, Profit division, Profit expansion
Abstract
Under continual innovation, greater patent strength expands innovating firms' profit against imitation, but also shifts profit from current to past innovators. We show how the impact of patents on innovation, as determined by these two opposing effects, varies with industry characteristics. When the discount factor is sufficiently high, the negative profit division effect is negligible, and innovation monotonically increases in patent strength; otherwise, innovation has an inverted-U relationship with patent strength, and stronger patents are more likely to increase innovation when the discount factor or the fixed innovation cost is higher. We also show how the impact of patents on innovation may change with firms' innovation capability and with the intensity of competition from imitators.
DOI
10.1016/j.jebo.2013.12.005
Print ISSN
01672681
Publisher Statement
Copyright © 2013 Elsevier B.V.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Chen, Y., Pan, S., & Zhang, T. (2014). (When) Do stronger patents increase continual innovation? Journal of Economic Behavior & Organization, 98, 115-124. doi: 10.1016/j.jebo.2013.12.005
