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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.

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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.
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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.

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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
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