Intellectual Property Rights Policy, Competition, and Innovation

Innovation and Economic Growth, Intellectual Property and Competition Policy and Antitrust

Article Snapshot

Author(s)

Daron Acemoglu and Ufuk Akcigit

Source

Journal of the European Economic Association, Vol. 10, No. 1, pp. 1-42, 2012

Summary

This paper shows that granting stronger intellectual property rights to technology leaders can increase innovation.

Policy Relevance

If firms are granted intellectual property rights that increase in strength with the firm’s technological edge, all firms will be incentivized to increase research and development activities. This may be expected to increase overall innovation.

Main Points

  • Intellectual property rights (IPR) like patents have mixed effects on innovation.  
    • As IPR protection increases, companies have more incentive to innovate because they will have exclusive control of the products of their research for a longer period of time.  
    • On the other hand, as IPR protection increases, the ability of other firms to take advantage of new technologies quickly and cheaply declines.
       
  • Overall research and development, and technological progress, tend to be greater in an industry when the technological gap between industry leaders and their competitors is small.
     
  • Intuitively, it may seem that granting greater IPR protection to a firm when its technological advantage over competitors is large will cement its dominant market position.
     
  • This paper develops a math model of competition in industries where innovation is important, and shows that innovation increases when IPR protection increases with a firm’s technological lead.  
    • Under this policy, firms that are not technology leaders have incentive to invest in research and development to prevent the leader’s advantage (and so their IPR protection) from growing.  
    • Technology leaders themselves are incentivized to invest in research in order to obtain even-greater IPR protection.
       

 

Get The Article

Find the full article online

Search for Full Article

Share