nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2017‒02‒26
four papers chosen by
Giovanni Ramello
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Endogenous Appropriability By Joshua S. Gans; Scott Stern
  2. Optimal Incentives for Patent Challenges in the Pharmaceutical Industry By Böhme, Enrico; Frank, Severin; Kerber, Wolfgang
  3. Back to Basics: Why do Firms Invest in Research? By Ashish Arora; Sharon Belenzon; Lia Sheer
  4. Do Migrant and Business Networks Promote International Royalty Receipts? By TOMOHARA Akinori

  1. By: Joshua S. Gans; Scott Stern
    Abstract: The appropriability of innovation depends not only on the instruments available to an innovator to protect private returns, but how those instruments interact with each other as part of the firm’s entrepreneurial strategy. We consider the interplay between two appropriability mechanisms available to start-up innovators: control, whereby the innovator earns rents from their establishment of formal intellectual property rights, versus execution, whereby innovators earn returns through a first-mover advantage that yields dynamic benefits allowing the firm to “get ahead, stay ahead.” While most prior work has taken these instruments to be independent, we establish that these two alternative appropriability instruments are substitutes on the margin. For example, if the learning advantage from execution is sufficiently high, an entrepreneur might choose not to invest in a patent, even if intellectual property protection is costless. Moreover, the endogenous choice between control and execution is interdependent with other strategic choices of start-up innovators, such as the choice to pursue a narrow or broad customer segment, or whether to commercialize a “minimal viable product” version of their innovation versus delay commercialization until a product is available with a higher level of technical functionality and reliability.
    JEL: O31 O34
    Date: 2017–02
  2. By: Böhme, Enrico; Frank, Severin; Kerber, Wolfgang
    Abstract: Patent settlements in the pharmaceutical industry between originator and generic firms have been scrutinized critically by competition authorities for delaying the market entry of generics and being therefore potentially anticompetitive. In this paper we present a model that analyzes the tradeoff between limiting the delaying of generic entry through patent settlements and giving generic firms more incentives for challenging weak patents of the originator firms. We can show that under general assumptions allowing patent settlements with a later market entry of generics than the expected market entry under patent litigation would increase consumer welfare. We introduce a policy parameter for determining the optimal additional period for collusion that would maximize consumer welfare and show that the size of this policy parameter depends on the size of the challenging costs, the intensity of competition, and the duration between the market entries of the first and second generic.
    JEL: L10 L40 O34
    Date: 2016
  3. By: Ashish Arora; Sharon Belenzon; Lia Sheer
    Abstract: If scientific knowledge is a public good, why do firms invest in research? This paper revisits this question with new data on patent citations to corporate scientific publications. Using data on 4,736 firms for the period 1980-2006, we explore the relationship between the use of corporate research in invention and the output of corporate scientific publications. Our principal contribution is to document that corporate investment in research is closely related to its use in invention. Specifically, firms that build on their scientific publications in their inventive activity invest more in research than those that are less successful in using their research internally. Consistent with this, research that is internally used is valued more and is more productive.
    JEL: O31 O32
    Date: 2017–02
  4. By: TOMOHARA Akinori
    Abstract: This study examines how migration and business networks affect trade on intellectual property using bilateral data on Japan (or the United States) and the Organisation for Economic Co-operation and Development (OECD) member countries. The analyses are distinct in that they examine network effects comprehensively by combining previous works on tangible trade-migration relationships, together with the literature on trade-foreign direct investment (FDI) relationships. We show that intellectual property exports are positively related with the number of immigrants residing in Japan (or the United States). However, other network effects, specifically business networks, are not necessarily universal because two forces, i.e., network effects and trade-FDI interactions, could operate in opposite directions. We conclude that positive immigration network effects occur, but emigration and business network effects could vary depending on the development stages of intellectual property trade.
    Date: 2017–01

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