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PATENT PROTECTION, OPTIMAL LICENSING, AND INNOVATION WITH ENDOGENOUS ENTRY

Published online by Cambridge University Press:  14 April 2019

Keishun Suzuki
Keishun Suzuki*
Affiliation:
Chiba University
*
Address correspondence to: Keishun Suzuki, Graduate School of Social Sciences, Chiba University, 1-33, Yayoi-cho, Inage-ku, Chiba, Japan. e-mail: [email protected]. Phone: +81-43-290-3705.
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Abstract

How does patent policy affect innovation when patent licensing is crucial for firms? To address this question, the present study incorporates voluntary patent licensing between an innovator and followers, as discussed in the literature of industrial organization, into a dynamic general equilibrium model. Unlike previous studies, both the licensing fee and the number of licensees are endogenously determined by the innovator’s maximization and the free-entry condition. Using this model, we show that strong patent protection does not always enhance innovation, economic growth, and welfare. Furthermore, the extended analysis provides the policy implication that the effect of patent policy depends on how difficult further innovation is without patent licensing of the current leading technology.

Keywords

InnovationPatent ProtectionOptimal Patent LicensingEndogenous Market Structure
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 8 , December 2020 , pp. 2033 - 2059
Copyright
© 2019 Cambridge University Press

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Footnotes

I would like to thank Shin Kishimoto, Yuichi Furukawa, an anonymous associate editor, two anonymous referees, all attendees at the 2018 Asian Meeting of the Econometric Society in Korea, the 2018 Spring Meeting of the Japan Economic Association at Hyogo, and the 2018 Annual Meeting of the Association of Southern European Economic Theorists in Florence for their comments and advice. This study is financially supported by the Japan Society for the Promotion of Science, Grant-in-Aid for Young Scientists (B) No.16K17109. All remaining errors are my own.

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