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on Technology and Industrial Dynamics |
| By: | Giovanni Dosi; Luigi Marengo; Corrado Pasquali |
| Abstract: | The paper attempts a critical assessment of both the theory and the empirical evidence on the role of appropriability and in particular of Intellectual Property Right (IPR) as incentives for technological innovation. We start with a critical discussion of the standard justification of the attribution of IPR in terms of "market failures" in knowledge generation. Such an approach we argue misses important features of technological knowledge and also neglects the importance of non-market institutions in the innovation process. Next, we examine the recent changes in the IPR regimes and their influence upon both rates of patenting and underlying rates of innovation. The evidence broadly suggests that, first, IPRs are not the most important device apt to "profit from innovation"; and second, they have at best no impact, or possibly even a negative impact on the underlying rates of innovation. Rather, we argued, technology- and industry-specific patterns of innovation are primarily driven by the opportunities associated with each technological paradigm. Conversely, firm-specific abilities to seize them and "profit from innovation" depend partly on adequacy of the strategic combinations identified by the taxonomy of Teece (1986) and partly on idiosyncratic capabilities embodied in the various firms. |
| Keywords: | Appropriability, Intellectual Property Right, Innovation, Technological opportunities |
| Date: | 2006–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2006/17&r=tid |
| By: | Mari Maunula |
| Keywords: | venture capital, biotechnology |
| JEL: | G24 L65 M13 |
| Date: | 2006–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:rif:dpaper:1030&r=tid |
| By: | Paul Klemperer (Nuffield College, University of Oxford); Joseph Farrell (University of California) |
| Abstract: | Switching costs and network effects bind customers to vendors if products are incompatible, locking customers or even markets in to early choices. Lock-in hinders customers from changing suppliers in response to (predictable or unpredictable) changes in effciency, and gives vendors lucrative ex post market power-over the same buyer in the case of switching costs (or brand loyalty), or over others with network effects. Firms compete ex ante for this ex post power, using penetration pricing, introductory offers, and price wars. Such "competition for the market" or "life-cycle competition" can adequately replace ordinary compatible competition, and can even be fiercer than compatible competition by weakening differentiation. More often, however, incompatible competition not only involves direct effciency losses but also softens competition and magnifies incumbency advantages. With network effects, established firms have little incentive to offer better deals when buyers’ and complementors’ expectations hinge on non-effciency factors (especially history such as past market shares), and although competition between incompatible networks is initially unstable and sensitive to competitive offers and random events, it later "tips" to monopoly, after which entry is hard, often even too hard given incompatibility. And while switching costs can encourage small-scale entry, they discourage sellers from raiding one another’s existing customers, and s also discourage more aggressive entry. Because of these competitive effects, even ineffcient incompatible competition is often more profitable than compatible competition, especially for dominant rms with installed-base or expectational advantages. Thus firms probably seek incompatibility too often. We therefore favor thoughtfully pro-compatibility public policy. |
| Date: | 2006–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:econwp:0607&r=tid |