IDEAS home Printed from https://ideas.repec.org/a/ucp/jpolec/doi10.1086-674134.html
   My bibliography  Save this article

How Do Competitive Pressures Affect Incentives to Innovate When There Is a Market for Inventions?

Author

Listed:
  • Daniel F. Spulber

Abstract

Competition and intellectual property (IP) protections are complements in stimulating innovation. When IP is appropriable, a market for inventions forms and competitive pressures increase incentives to innovate. Competition among producers, the demand side of the market for inventions, and competition among inventors, the supply side of the market for inventions, create incentives to innovate. When IP is not fully appropriable, markets for inventions are limited and competitive pressures can decrease incentives to innovate. Firms vertically integrate R&D and production and share technology to appropriate the returns to IP. This implies that antitrust policy and IP protections are complements.

Suggested Citation

  • Daniel F. Spulber, 2013. "How Do Competitive Pressures Affect Incentives to Innovate When There Is a Market for Inventions?," Journal of Political Economy, University of Chicago Press, vol. 121(6), pages 1007-1054.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/674134
    DOI: 10.1086/674134
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/674134
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: http://dx.doi.org/10.1086/674134
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/674134?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(2), pages 217-235.
    2. J. Gregory Sidak & David J. Teece, 2009. "Dynamic Competition In Antitrust Law," Journal of Competition Law and Economics, Oxford University Press, vol. 5(4), pages 581-631.
    3. Tommy Clausen & Mikko Pohjola & Koson Sapprasert & Bart Verspagen, 2012. "Innovation strategies as a source of persistent innovation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 21(3), pages 553-585, June.
    4. Link, Albert N, 1980. "Firm Size and Efficient Entrepreneurial Activity: A Reformulation of the Schumpeter Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 88(4), pages 771-782, August.
    5. Jeff S. Armstrong & Michael R. Darby & Lynne G. Zucker, 2003. "Commercializing knowledge: university science, knowledge capture and firm performance in biotechnology," Proceedings, Federal Reserve Bank of Dallas, issue Sep, pages 149-170.
    6. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(3), pages 1049-1090.
    7. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    8. Mowery,David C. & Rosenberg,Nathan, 1991. "Technology and the Pursuit of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521389365, January.
    9. Pellegrino, Gabriele & Piva, Mariacristina & Vivarelli, Marco, 2012. "Young firms and innovation: A microeconometric analysis," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 329-340.
    10. Fisher, Franklin M & Temin, Peter, 1973. "Returns to Scale in Research and Development: What Does the Schumpeterian Hypothesis Imply ?," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 56-70, Jan.-Feb..
    11. Nelson, Richard R. & Winter, Sidney G., 1993. "In search of useful theory of innovation," Research Policy, Elsevier, vol. 22(2), pages 108-108, April.
    12. George Symeonidis, 2000. "Price and Nonprice Competition with Endogenous Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(1), pages 53-83, March.
    13. Galambos, Louis & Sturchio, Jeffrey L., 1998. "Pharmaceutical Firms and the Transition to Biotechnology: A Study in Strategic Innovation," Business History Review, Cambridge University Press, vol. 72(2), pages 250-278, July.
    14. Veugelers, Reinhilde & Cassiman, Bruno, 1999. "Make and buy in innovation strategies: evidence from Belgian manufacturing firms," Research Policy, Elsevier, vol. 28(1), pages 63-80, January.
    15. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    16. Piercarlo Zanchettin, 2006. "Differentiated Duopoly with Asymmetric Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 999-1015, December.
    17. Arghya Ghosh & Hodaka Morita, 2007. "Free entry and social efficiency under vertical oligopoly," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 541-554, June.
    18. Franco Malerba, 2007. "Innovation and the evolution of industries," Springer Books, in: Uwe Cantner & Franco Malerba (ed.), Innovation, Industrial Dynamics and Structural Transformation, pages 7-27, Springer.
    19. Keld Laursen & Maria Isabella Leone & Salvatore Torrisi, 2010. "Technological exploration through licensing: new insights from the licensee's point of view," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 19(3), pages 871-897, June.
    20. David B. Audretsch, 1995. "Innovation and Industry Evolution," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011468, December.
    21. Levin, Richard C & Cohen, Wesley M & Mowery, David C, 1985. "R&D Appropriability, Opportunity, and Market Structure: New Evidence on Some Schumpeterian Hypotheses," American Economic Review, American Economic Association, vol. 75(2), pages 20-24, May.
    22. Tandon, Pankaj, 1984. "Innovation, Market Structure, and Welfare," American Economic Review, American Economic Association, vol. 74(3), pages 394-403, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cohen, Wesley M., 2010. "Fifty Years of Empirical Studies of Innovative Activity and Performance," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 129-213, Elsevier.
    2. Cuervo-Cazurra, Alvaro & Un, C. Annique, 2007. "Regional economic integration and R&D investment," Research Policy, Elsevier, vol. 36(2), pages 227-246, March.
    3. Harhoff, Dietmar, 1991. "R&D incentives and spillovers in a two-industry model," ZEW Discussion Papers 91-06, ZEW - Leibniz Centre for European Economic Research.
    4. Ming Chung Chang & Hsiao‐Ping Peng, 2009. "Structure Regulation, Price Structure, Cross‐Subsidization And Marginal Cost Of Public Funds," Manchester School, University of Manchester, vol. 77(6), pages 675-698, December.
    5. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    6. Dosi, Giovanni & Nelson, Richard R., 2010. "Technical Change and Industrial Dynamics as Evolutionary Processes," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 51-127, Elsevier.
    7. Giovanni Dosi & Richard Nelson, 2013. "The Evolution of Technologies: An Assessment of the State-of-the-Art," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(1), pages 3-46, June.
    8. Francesco Bogliacino & Matteo Lucchesex & Leopoldo Nascia & Mario Pianta, 2015. "The Virtuous Circle of Innovation in Italian Firms," Documentos de Trabajo, Escuela de Economía 12630, Universidad Nacional de Colombia, FCE, CID.
    9. Pilar Beneito & Paz Coscollá-Girona & María Engracia Rochina-Barrachina & Amparo Sanchis, 2015. "Competitive Pressure and Innovation at the Firm Level," Journal of Industrial Economics, Wiley Blackwell, vol. 63(3), pages 422-457, September.
    10. Michael L. Katz & Howard A. Shelanski, 2005. "Merger Policy and Innovation: Must Enforcement Change to Account for Technological Change?," NBER Chapters, in: Innovation Policy and the Economy, Volume 5, pages 109-165, National Bureau of Economic Research, Inc.
    11. Leone, Maria Isabella & Messeni Petruzzelli, Antonio & Natalicchio, Angelo, 2022. "Boundary spanning through external technology acquisition: The moderating role of star scientists and upstream alliances," Technovation, Elsevier, vol. 116(C).
    12. Konstantinos Konstantakis & Panayotis G. Michaelides & Theofanis Papageorgiou, 2014. "Sector size, technical change and stability in the USA (1957-2006): a Schumpeterian approach," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 41(10), pages 956-974, October.
    13. Bastian Rake, 2017. "Determinants of pharmaceutical innovation: the role of technological opportunities revisited," Journal of Evolutionary Economics, Springer, vol. 27(4), pages 691-727, September.
    14. Rachel Ngai & Roberto Samaniego, 2011. "Accounting for Research and Productivity Growth Across Industries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(3), pages 475-495, July.
    15. Buehler Stefan & Kaiser Christian & Jaeger Franz, 2005. "Competition Policy and Exit Rates: Evidence from Switzerland," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-28, November.
    16. Ghosh, Arghya & Kato, Takao & Morita, Hodaka, 2017. "Incremental innovation and competitive pressure in the presence of discrete innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 1-14.
    17. Rey, Patrick & Salant, David, 2012. "Abuse of dominance and licensing of intellectual property," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 518-527.
    18. Cristiano Antonelli & Giuseppe Scellato, 2011. "Out-of-equilibrium profit and innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(5), pages 405-421.
    19. Choné, Philippe & Linnemer, Laurent, 2020. "Linear demand systems for differentiated goods: Overview and user’s guide," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    20. Berthold Herrendorf & Yan Bai, 2009. "What is the Relationship between Competition and Productivity," 2009 Meeting Papers 1142, Society for Economic Dynamics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jpolec:doi:10.1086/674134. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JPE .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.