| Abstract: |
Firms racing to innovate often make interim breakthroughs that speed up, but
are not necessary for, the final innovation. When such a breakthrough is
privately acquired, a firm can disclose it by filing a patent, or conceal it.
This paper studies how this trade off is shaped by the race structure and the
intellectual property system. We develop a dynamic model where firms allocate
resources between developing with an existing technology and researching a
faster one. We show that firms strategically conceal their breakthroughs when
the prize for winning is large and the prior-use defense is strong, impeding
knowledge spillovers and slowing the pace of innovation. |