Skip to main content
×
×
Home

A PATENTABILITY REQUIREMENT AND INDUSTRY-TARGETED R&D

  • Keiichi Kishi (a1)
Abstract

I introduce a minimum innovation size required for patents into a Schumpeterian growth model. We show that to satisfy the patentability requirement for minimum innovation size, each research and development (R&D) firm targets only industries in which the incumbent's technology is of sufficient obsolescence. This is because the technological gap between innovator and incumbent is greater in industries using older technologies. Although the increase in minimum innovation size reduces the number of industries targeted for R&D, it also increases the amount of R&D investment directed at those targeted industries. Consequently, introducing a minimum innovation size has a nonmonotonic (or negative) effect on the aggregate flow of innovations. Further, by deriving the endogenous long-run distribution of innovation size, we show that an increase in minimum innovation size reduces the mean innovation size. This implies that even if the patent office only grants patents for superior innovations, it causes innovators to produce generally inferior-quality innovations.

Copyright
Corresponding author
Address correspondence to: Keiichi Kishi, Faculty of Economics, Kansai University, 3-3-35 Yamate, Suita, Osaka 564-8680, Japan; e-mail: kishi@kansai-u.ac.jp.
Footnotes
Hide All

I am grateful to two anonymous referees for their very constructive comments and suggestions on an earlier version of this paper. I especially thank the associate editor for some excellent suggestions and encouragement in submitting a revision. Further, I also thank Tatsuro Iwaisako, Koichi Futagami, Tetsugen Haruyama, and Vincenzo Denicolò for their useful comments and encouragement. The author gratefully acknowledges the financial support of a Grant for Excellent Graduate Schools from the Ministry of Education, Culture, Sports, Science, and Technology, Japan. I also acknowledges the financial support from the Japan Society for the Promotion of Science (JSPS) via Grant-in-Aid for JSPS Research Fellow Grant Number JP15J03874. The usual disclaimer applies.

Footnotes
References
Hide All
Aghion, Philippe and Howitt, Peter (1992) A model of growth through creative destruction. Econometrica 60 (2), 323351.
Aghion, Philippe and Howitt, Peter (1998) Endogenous Growth Theory. Cambridge, MA: MIT Press.
Benhabib, Jess, Perla, Jesse, and Tonetti, Christopher (2014) Catch-up and fall-back through innovation and imitation. Journal of Economic Growth 19 (1), 135.
Caballero, Ricardo J. and Jaffe, Adam B. (1993) How high are the giants' shoulders: An empirical assessment of knowledge spillovers and creative destruction in a model of economic growth. In Blanchard, Olivier and Fischer, Stanley (eds.), NBER Macroeconomics Annual 1993, pp. 1574. Cambridge, MA: MIT Press.
Chu, Angus C., Cozzi, Guido, and Galli, Silvia (2012a) Does intellectual monopoly stimulate or stifle innovation? European Economic Review 56 (4), 727746.
Chu, Angus C. and Pan, Shiyuan (2013) The escape-infringement effect of blocking patents on innovation and economic growth. Macroeconomic Dynamics 17 (4), 955969.
Chu, Angus C., Pan, Shiyuan, and Sun, Minjuan (2012b) When does elastic labor supply cause an inverted-U effect of patents on innovation? Economics Letters 117 (1), 211213.
Cozzi, Guido (2001) Inventing or spying? Implications for growth. Journal of Economic Growth 6 (1), 5577.
Cozzi, Guido and Spinesi, Luca (2006) Intellectual appropriability, product differentiation, and growth. Macroeconomic Dynamics 10 (1), 3955.
Davis, Lewis S. and Şener, Fuat (2012) Private patent protection in the theory of Schumpeterian growth. European Economic Review 56 (7), 14461460.
Di Matteo, T., Aste, T., and Gallegati, M. (2005) Innovation flow through social networks: Productivity distribution in France and Italy. European Physical Journal B 47 (3), 459466.
Eicher, Theo and García-Peñalosa, Cecilia (2008) Endogenous strength of intellectual property rights: Implications for economic development and growth. European Economic Review 52 (2), 237258.
Federal Trade Commission (2003) To Promote Innovation: A Proper Balance of Competition and Patent Law and Policy. Available at http://www.ftc.gov/reports/promote-innovation-proper-balance-competition-patent-law-policy.
Furukawa, Yuichi (2007) The protection of intellectual property rights and endogenous growth: Is stronger always better? Journal of Economic Dynamics & Control 31 (11), 36443670.
Furukawa, Yuichi (2010) Intellectual property protection and innovation: An inverted-U relationship. Economics Letters 109 (2), 99101.
Futagami, Koichi and Iwaisako, Tatsuro (2007) Dynamic analysis of patent policy in an endogenous growth model. Journal of Economic Theory 132 (1), 306334.
Gallini, Nancy T. (1992) Patent policy and costly imitation. Rand Journal of Economics 23 (1), 5263.
Gangopadhyay, Kausik and Mondal, Debasis (2012) Does stronger protection of intellectual property stimulate innovation? Economics Letters 116 (1), 8082.
Gilbert, Richard and Shapiro, Carl (1990) Optimal patent length and breadth. RAND Journal of Economics 21 (1), 106112.
Ginarte, Juan C. and Park, Walter G. (1997) Determinants of patent rights: A cross-national study. Research Policy 26 (3), 283301.
Grossman, Gene M. and Helpman, Elhanan (1991) Innovation and Growth in the Global Economy. Cambridge, MA: MIT Press.
Harhoff, Dietmar, Scherer, Frederic M., and Vopel, Katrin (2003) Exploring the tail of patented invention value distributions. In Grandstrand, Ove. (Ed.), Economics, Law, and Intellectual Property, pp. 279309. Boston: Kluwer.
Horii, Ryo and Iwaisako, Tatsuro (2007) Economic growth with imperfect protection of intellectual property rights. Journal of Economics 90 (1), 4585.
Howitt, Peter (1999) Steady endogenous growth with population and R&D inputs growing. Journal of Political Economy 107 (4), 715730.
Howitt, Peter (2000) Endogenous growth and cross-country income differences. American Economic Review 90 (4), 829846.
Howitt, Peter and Aghion, Philippe (1998) Capital accumulation and innovation as complementary factors in long-run growth. Journal of Economic Growth 3 (2), 111130.
Iwaisako, Tatsuro and Futagami, Koichi (2003) Patent policy in an endogenous growth model. Journal of Economics 78 (3), 239258.
Iwaisako, Tatsuro and Futagami, Koichi (2013) Patent protection, capital accumulation, and economic growth. Economic Theory 52 (2), 631668.
Jones, Charles I. and Williams, John C. (2000) Too much of a good thing? The economics of investment in R&D. Journal of Economic Growth 5 (1), 6585.
Judd, Kenneth L. (1985) On the performance of patents. Econometrica 53 (3), 567586.
Kishi, Keiichi (2015) Dynamic analysis of wage inequality and creative destruction. Journal of Economics 115 (1), 123.
Koléda, Gilles (2008) Promoting innovation and competition with patent policy. Journal of Evolutionary Economics 18 (3–4), 433453.
König, Michael D., Lorenz, Jan, and Zilibotti, Fabrizio (2016) Innovation vs. imitation and the evolution of productivity distributions. Theoretical Economics 11 (3), 10531102.
Kortum, Samuel (1993) Equilibrium R&D and the patent–R&D ratio: U.S. evidence. American Economic Review 83 (2), 450457.
Lemley, Mark A. and Shapiro, Carl (2005) Probabilistic patents. Journal of Economic Perspectives 19 (2), 7598.
Lerner, Josh (2009) The empirical impact of intellectual property rights on innovation: Puzzle and clues. American Economic Review 99 (2), 343348.
Li, Chol-Won (2001) On the policy implications of endogenous technological progress. Economic Journal 111 (471), C164C179.
Li, Chol-Won (2003) Endogenous growth without scale effects: Comment. American Economic Review 93 (3), 10091017.
Lucas, Robert E. Jr., and Moll, Benjamin (2014) Knowledge growth and the allocation of time. Journal of Political Economy 122 (1), 151.
Mankiw, N. Gregory, Romer, David, and Weil, David N. (1992) A contribution to empirics of economic growth. Quarterly Journal of Economics 107 (2), 407437.
Minniti, Antonio, Parello, Carmelo P., and Segerstrom, Paul S. (2013) A Schumpeterian growth model with random quality improvements. Economic Theory 52 (2), 755791.
National Academy of Science (2004) A Patent System for the 21st Century. Available at http://www.nap.edu/openbook.php?isbn=0309089107.
O'Donoghue, Ted (1998) A patentability requirement for sequential innovation. Rand Journal of Economics 29 (4), 654679.
O'Donoghue, Ted, Scotchmer, Suzanne, and Thisse, Jacques-François (1998) Patent breadth, patent life, and the pace of technological progress. Journal of Economics and Management Strategy 7 (1), 132.
O'Donoghue, Ted and Zweimüller, Josef (2004) Patents in a model of endogenous growth. Journal of Economic Growth 9 (1), 81123.
Palokangas, Taplo (2011) Optimal patent length and breadth in an economy with creative destruction and non-diversifiable risk. Journal of Economics 102 (1), 127.
Perla, Jesse and Tonetti, Christopher (2014) Equilibrium imitation and growth. Journal of Political Economy 122 (1), 5276.
Qian, Yi (2007) Do national patent laws stimulate domestic innovation in a global patenting environment? A cross-country analysis of pharmaceutical patent protection 1978–2002. Review of Economics and Statistics 89 (3), 436453.
Sakakibara, Mariko and Branstetter, Lee (2001) Do stronger patents induce more innovation? Evidence from the 1988 Japanese patent law reforms. Rand Journal of Economics 32 (1), 77100.
Scherer, F.M. and Harhoff, Dietmar (2000) Technology policy for a world of skew-distributed outcomes. Research Policy 32 (8), 559566.
Scherer, F.M., Harhoff, Dietmar, and Kukies, Jörg (2000) Uncertainty and the size distribution of rewards from innovation. Journal of Evolutionary Economics 10 (1), 175200.
Scotchmer, Suzanne and Green, Jerry (1990) Novelty and disclosure in patent law. Rand Journal of Economics 21 (1), 131146.
Silverberg, Gerald and Verspagen, Bart (2007) The size distribution of innovations revisited: An application of extreme value statistics to citation and value measures of patent significance. Journal of Econometrics 139 (2), 318339.
Suzuki, Keishun (2015) Economic growth under two forms of intellectual property rights protection: Patents and trade secrets. Journal of Economics 115 (1), 4971.
Thompson, Peter (1996) Technological opportunity and the growth of knowledge: A Schumpeterian approach to measurement. Journal of Evolutionary Economics 6 (1), 7797.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 49 *
Loading metrics...

Abstract views

Total abstract views: 245 *
Loading metrics...

* Views captured on Cambridge Core between 31st January 2018 - 17th July 2018. This data will be updated every 24 hours.