IDEAS home Printed from https://ideas.repec.org/p/kyo/wpaper/1065.html
   My bibliography  Save this paper

Technology Competition, Cumurative Innovation, and Technological Development Scheme

Author

Listed:
  • Masahito Ambashi

    (Institute of Economic Research, Kyoto University)

Abstract

This paper investigates which technological development scheme is desirable in technology competition and cumulative innovation with signiï¬ cant uncertainty included in the follow-on innovation. Technology competition is likely to generate a socially overincentive for innovation especially when consumer surplus is negligible. This paper ï¬ rst ï¬ nds that grant-back clause combined with an appropriate distribution of expected proï¬ ts mitigates the socially overinvestments in both the initial and follow-on technologies, and therefore, improves social welfare. In particular, this paper shows that if a government authority can specify a particular distribution of expected proï¬ ts between the ï¬ rms, the socially optimal investment in the initial technology can be realized. On the other hand, assuming signiï¬ cantly positive consumer surplus instead, this paper reveals that competition in the follow-on technology creates higher social welfare as consumer surplus is large.

Suggested Citation

  • Masahito Ambashi, 2021. "Technology Competition, Cumurative Innovation, and Technological Development Scheme," KIER Working Papers 1065, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:1065
    as

    Download full text from publisher

    File URL: https://www.kier.kyoto-u.ac.jp/wp/wp-content/uploads/2021/08/DP1065.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
    2. Tao, Zhigang & Wu, Changqi, 1997. "On the organization of cooperative research and development: Theory and evidence," International Journal of Industrial Organization, Elsevier, vol. 15(5), pages 573-596, August.
    3. Bronwyn H. Hall, 2007. "Patents and patent policy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 23(4), pages 568-587, Winter.
    4. Albert Banal‐Estañol & Inés Macho‐Stadler, 2010. "Scientific and Commercial Incentives in R&D: Research versus Development?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(1), pages 185-221, March.
    5. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    6. Bronwyn H. Hall & Nathan Rosenberg (ed.), 2010. "Handbook of the Economics of Innovation," Handbook of the Economics of Innovation, Elsevier, edition 1, volume 1, number 1.
    7. van Dijk, Theon, 2000. "Licence contracts, future exchange clauses, and technological competition," European Economic Review, Elsevier, vol. 44(8), pages 1431-1448, August.
    8. Shapiro, Carl, 1985. "Patent Licensing and R&D Rivalry," American Economic Review, American Economic Association, vol. 75(2), pages 25-30, May.
    9. Ambashi, Masahito & Régibeau, Pierre & Rockett, Katharine E., 2019. "Grantbacks, territorial restraints, and innovation," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    10. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
    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. Rockett, Katharine, 2010. "Property Rights and Invention," 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 315-380, Elsevier.
    2. Hans K. Hvide & Benjamin F. Jones, 2018. "University Innovation and the Professor's Privilege," American Economic Review, American Economic Association, vol. 108(7), pages 1860-1898, July.
    3. Rockett, Kate & Régibeau, Pierre & Ambashi, Masahito, 2016. "Grantbacks, Territorial Restraints, and the Type of Follow-On Innovation: The "But for..." Defense," CEPR Discussion Papers 11575, C.E.P.R. Discussion Papers.
    4. Ambashi, Masahito & Régibeau, Pierre & Rockett, Katharine E., 2019. "Grantbacks, territorial restraints, and innovation," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    5. Gray, Elie & Grimaud, André, 2014. "The Lindahl equilibrium in Schumpeterian growth models: Knowledge diffusion, social value of innovations and optimal R&D incentives," TSE Working Papers 14-469, Toulouse School of Economics (TSE).
    6. Elie Gray & André Grimaud, 2016. "The Lindahl equilibrium in Schumpeterian growth models," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 101-142, March.
    7. Gray, Elie & Grimaud, André, 2014. "The Lindahl equilibrium in Schumpeterian growth models: Knowledge diffusion, social value of innovations and optimal R&D incentives," IDEI Working Papers 821, Institut d'Économie Industrielle (IDEI), Toulouse.
    8. Francesco Squintani & Hugo A. Hopenhayn, 2016. "On the Direction of Innovation," 2016 Meeting Papers 1357, Society for Economic Dynamics.
    9. Jay Pil Choi, 2002. "A Dynamic Analysis of Licensing: The "Boomerang" Effect and Grant-Back Clauses," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 203-229, August.
    10. Elie Gray & André Grimaud, 2014. "The Lindahl Equilibrium in Schumpeterian Growth Models: Knowledge Diffusion, Social Value of Innovations and Optimal R&D Incentives," CESifo Working Paper Series 4678, CESifo.
    11. Lu, Louis Y.Y. & Liu, John S., 2016. "A novel approach to identify the major research themes and development trajectory: The case of patenting research," Technological Forecasting and Social Change, Elsevier, vol. 103(C), pages 71-82.
    12. Tina Kao, 2009. "Strategic Licensing And Sequential Innovations," Manchester School, University of Manchester, vol. 77(4), pages 512-551, July.
    13. Jorge Andrés Ferrando Yanez, 2003. "Innovate AND Imitate ? : Dynamic Innovation, Patents, and Costly Imitation," Working Papers 2003-31, Center for Research in Economics and Statistics.
    14. Llanes Gastón & Trento Stefano, 2011. "Anticommons and Optimal Patent Policy in a Model of Sequential Innovation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-27, August.
    15. 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.
    16. Joshua S. Gans & David H. Hsu & Scott Stern, 2002. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 571-586, Winter.
    17. Bernhard Ganglmair & Imke Reimers, 2019. "Visibility of Technology and Cumulative Innovation: Evidence from Trade Secrets Laws," CRC TR 224 Discussion Paper Series crctr224_2019_119v1, University of Bonn and University of Mannheim, Germany.
    18. Jerbashian Vahagn, 2016. "Knowledge licensing in a model of R&D-driven endogenous growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 555-579, June.
    19. Aalbers, Rob & Shestalova, Victoria & Kocsis, Viktória, 2013. "Innovation policy for directing technical change in the power sector," Energy Policy, Elsevier, vol. 63(C), pages 1240-1250.
    20. Yann Ménière & Sarah Parlane, 2008. "Innovation in the Shadow of Patent Litigation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(2), pages 95-111, March.

    More about this item

    Keywords

    technology competition; cumulative innovation; initial and follow-on technologies; technological development scheme; grant-back clause;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:kyo:wpaper:1065. 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: Makoto Watanabe (email available below). General contact details of provider: https://edirc.repec.org/data/iekyojp.html .

    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.