nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2013‒02‒03
five papers chosen by
Giovanni Ramello
Universita' Amedeo Avogadro

  1. Market power in the global economy: the exhaustion and protection of intellectual property By Kamal Saggi
  2. Compulsory licensing, price controls, and access to patented foreign products By Eric Bond; Kamal Saggi
  3. Open global innovation networks as enablers of frugal innovation: propositions based on evidence from India By Tiwari, Rajnish; Herstatt, Cornelius
  4. Impact of external knowledge acquisition strategies on innovation – A comparative study based on Dutch and Swiss panel data By Spyros Arvanitis; Martin Wörter; Pierre Mohnen; Boris Lokshin
  5. To own or not to own: How ownership affects user innovation - An empirical study in the German rowing community By Tietze, Frank; Pieper, Thorsten; Herstatt, Cornelius

  1. By: Kamal Saggi (Department of Economics, Vanderbilt University)
    Abstract: We develop a North-South model in which a firm that enjoys monopoly status in the North (by virtue of a patent or a trademark) has the incentive to price discriminate internationally because Northern consumers value its product more than Southern ones. While North's policy regarding the territorial exhaustion of intellectual property rights (IPR) determines whether the firm can exercise market power across regions, Southern policy regarding the protection of IPR determines the firm's monopoly power within the South. In equilibrium, each region's policy takes into account the firm's pricing strategy, its incentive to export, and the other region's policy stance. Major results are: (i) the North is more likely to choose international exhaustion if the South protects IPR whereas the South is more willing to offer such protection if the North implements national exhaustion; (ii) the firm values IPR protection less than the freedom to price discriminate internationally if and only if its quality advantage over Southern imitators exceeds a certain threshold; and (iii) requiring the South to protect IPR increases global welfare iff such protection is necessary for inducing the firm to export to the South.
    Keywords: Exhaustion of IPRs, Imitation, Market power, TRIPS, Welfare
    JEL: D6
    Date: 2012–12–06
  2. By: Eric Bond (Department of Economics, Vanderbilt University); Kamal Saggi (Department of Economics, Vanderbilt University)
    Abstract: Motivated by existing multilateral rules regarding intellectual property, we develop a North-South model to highlight the dual roles price controls and compulsory licensing play in determining Southern access to a patented Northern product. The Northern patent-holder chooses whether and how to work its patent in the South (either via entry or voluntarily licensing) while the South determines the price control and whether to issue a compulsory license. The threat of compulsory licensing benefits the South and also increases global welfare when the North-South technology gap is significant. The price control and compulsory licensing are complementary instruments from the Southern perspective.
    Keywords: Patented Goods, Compulsory Licensing, Price Controls, Quality, Welfare
    JEL: F0
    Date: 2012–12–07
  3. By: Tiwari, Rajnish; Herstatt, Cornelius
    Abstract: Recent years have seen the emergence of low-cost innovations targeted at economically weaker sections of the society, seeking to align business with social welfare. In many instances, results on the ground have been, however, rather sobering as firms have generally (probably justifiably) worried that 'good quality, low price' products may cannibalize into their regular business. At the same time those very customers that were intended to benefit from the new approach have tended to shy away fearing low quality and social stigma of using cheap products. Using multiple case studies of successful affordability-driven innovations ('frugal innovations') from India we investigate how firms can effectively reduce market and technology uncertainty of product innovations targeted at price-sensitive customers. The key criteria to success seem to lie in reducing the overall cost of ownership and enhancing customer perception of quality and image. The case studies reveal that affordability-driven innovations are especially successful when firms seek recourse to open global innovation networks (OGINs) for collaborative development in all phases of the innovation value chain. --
    Keywords: frugal innovations,bottom of the pyramid,lead markets,open innovation,global innovation,India,open global innovation networks,innovation systems
    Date: 2012
  4. By: Spyros Arvanitis (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Martin Wörter (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Pierre Mohnen (Maastricht University); Boris Lokshin (Maastricht University)
    Abstract: There is growing evidence that firms increasingly adopt open innovation practices. In this paper we investigate the impact of two such external knowledge acquisition strategies, ‘buy’ and ‘cooperate’, on firm’s product innovation performance. Taking a direct (productivity) approach, we test for complementarity effects in the simultaneous use of the two strategies, and in the intensity of their use. Our results based on large panels of Dutch and Swiss innovating firms, suggest that while both ‘buy’ and ‘cooperate’ have a positive effect on innovation, there is little statistical evidence that using them simultaneously leads to higher innovation performance. Results from the Dutch sample provide some indication, that there are positive economies of scope in doing external and cooperative R&D simultaneously conditional on doing internal R&D.
    Keywords: Open innovation, R&D collaboration, make, buy strategies
    JEL: O31 O32
    Date: 2013–01
  5. By: Tietze, Frank; Pieper, Thorsten; Herstatt, Cornelius
    Abstract: Prior research on user innovation has concentrated on markets in which products (e.g., mountain bikes, kitesurfing equipment, tools, etc.) are typically purchased by those users who modify them. However, in numerous markets, this is not the case, for example, those in which equipment is rented. Moreover, firms increasingly servitize, selling functionality instead of products. Thus, product ownership is being transferred to users less and less. Instead of purchasing products, users increasingly rent or lease equipment. Consequently, our research investigates the impact of product ownership on user innovation behavior. We question whether absent ownership is an innovation barrier, negatively impacting users' propensity to innovate. This should be particularly relevant to firms that collaborate with users, scouting for their ideas. This study was conducted in the German rowing community. In contrast with previously studied sports markets, equipment ownership in rowing often remains with sport clubs and not with individual users. Following a pre-study, we distributed a survey to the members of 410 clubs enlisted in the German Rowing Federation's roster. Our approach yielded 743 responses. We present results from multivariate ordinal and logistic regressions for two dependent variables (idea generation and realized ideas), differentiating between three ownership types (private, non-private with dedicated use, and non-private with shared use). Our results reveal that private ownership has significant positive effects on user innovation behavior. Users, who own their equipment develop significantly more innovative ideas and have a significantly higher probability to realize ideas than users who use equipment that is owned by a third party. We find that private ownership positively moderates use experience's impact on the development and realization of ideas. The results imply that manufacturers should be aware of the effect that ownership could have, particularly when offering services or in situations where ownership rights are not transferred to users (e.g., leasing models). We discuss measures to remedy the negative impact of absent ownership, such as equipment sponsorships complemented by specific use contracts, experiment labs, and insurances. --
    Date: 2013

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