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First mover advantages and optimal patent protection

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  • F. Scherer

Abstract

This paper examines the economic logic underlying so-called “first mover advantages” as alternatives to patent protection in allowing innovators protection from immediate imitation and time to recoup their research and development investments. These include a head start, lower costs due to learning by doing, and product-differentiating reputational advantages. William Nordhaus’ theory of optimal patent protection is extended to cases of product, as distinguished from cost-saving, innovation. Over the parameters covered by a simulation analysis, profit potentials sufficient to induce R&D investment are found much more frequently than R&D incentive failures. R&D failures occur most commonly in small markets and situations in which imitators’ erosion of the innovator’s market share is particularly rapid. Implications for patent policy are drawn. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • F. Scherer, 2015. "First mover advantages and optimal patent protection," The Journal of Technology Transfer, Springer, vol. 40(4), pages 559-580, August.
    • Handle: RePEc:kap:jtecht:v:40:y:2015:i:4:p:559-580
    DOI: 10.1007/s10961-015-9394-y
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    References listed on IDEAS

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    Cited by:

    1. Wang, I. Kim & Seidle, Russell, 2017. "The degree of technological innovation: A demand heterogeneity perspective," Technological Forecasting and Social Change, Elsevier, vol. 125(C), pages 166-177.
    2. David B. Audretsch & Albert N. Link & John T. Scott, 2018. "Frederic M. Scherer: Over a Half Century—and Counting—of Seminal Scholarly Contributions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(4), pages 501-508, June.
    3. Baxter, David & Trott, Paul & Ellwood, Paul, 2023. "Reconceptualising innovation failure," Research Policy, Elsevier, vol. 52(7).
    4. John Stayton & Vincent Mangematin, 2019. "Seed accelerators and the speed of new venture creation," The Journal of Technology Transfer, Springer, vol. 44(4), pages 1163-1187, August.

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    More about this item

    Keywords

    Technological innovation; Intellectual property or patents; Product differentiation; O34;
    All these keywords.

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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