(When) Do stronger patents increase continual innovation?

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.

Universal intellectual property rights: Too much of a good thing?

“…We show that when the South develops a relatively efficient R&D system, an asymmetric protection regime (strong in the North and lax in the South) often increases global innovation and welfare as compared to a universally strong protection of IPR. This result is consistent with Chen et al (2014). These authors show that, when innovation is "continual" (i.e.…”

“…incremental), stronger IPR are not necessarily conducive of higher innovation. In Chen et al (2014) innovation necessarily builds on the previous one, so that strong IPR oblige new innovators to share their profits with the first inventors who hold patents on the technology they need. This reduces the incentives to innovate of second generation innovators.…”

Effective innovation via better management of firms: The role of leverage in times of crisis

“…Similarly, also at an aggregate level, Nemlioglu and Mallick (2020a) and Nemlioglu (2019) uncovered that higher intellectual property (IP) supported by more vigorous enforcement leads to higher capital stock. Also, Chen et al (2014) find that substantial patent rights stimulate R&D activities in more-capital-intensive sectors in countries with more innovation capability. He andWintoki (2016), andCarosi (2016) uncovered that the increase in the average liquidity of US firms could be explained by their R&D investments.…”

Learning from press releases: implications for hospitality innovation

“…Registered patents are commonly used and easy to access objective output measure for innovation, particularly in manufacturing (Stuart, 2000). However, counting patents does not necessarily carry information about actually realized innovations as patents capture innovation potential and are an outcome of R&D general activities (Chen et al, 2014). Finally, as patents are not common in the hospitality and tourism industry (Hjalager, 2002), their usefulness to capture hospitality and tourism innovations is even further reduced.…”