2009/05 LEM Working Paper Series

Appropriability, Patents, and Rates of Innovation in Complex Products Industries

Luigi Marengo, Corrado Pasquali, Marco Valente, and Giovanni Dosi
  Keywords
 
Patents; Appropriability of Innovation; Complex Product Industries; Industrial Dynamics


  JEL Classifications
 
O31, O34, L11


  Abstract
 
The economic theory of intellectual property rights is based on a rather narrow view of both competition and technological knowledge. We suggest some ways of enriching this framework with a more empirically grounded view of both and, by means of a simulation model, we analyze the impact of different property right regimes on the dynamics of a complex product industry, that is an industry where products are complex multi-component objects and competition takes place mainly through differentiation and component innovation. We show that, as the complexity of the product spaces increases, stronger patent regimes yield lower rates of innovation, lower product quality and lower consumers' welfare.


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