Document Type
Article
Publication Date
Winter 2009
ISSN
0741-6261
Publisher
Rand Corporation
Language
en-US
Abstract
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.
Recommended Citation
James Bessen & Eric Maskin,
Sequential Innovation, Patents, and Imitation
,
in
40
RAND Journal of Economics
611
(2009).
Available at:
https://scholarship.law.bu.edu/faculty_scholarship/3171
Draft
Comments
Updated with published article on 9/19/2023
Article available through ProQuest open access agreement
Draft available on in additional files and on SSRN