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Patent protection, innovation and technology licensing

Wang, Leonard F.S.; Mukherjee, Arijit

Authors

Leonard F.S. Wang



Abstract

We show that the common wisdom suggesting higher investment in innovation under a stronger patent protection may not be true if the innovator can license its technology ex‐post innovation. If the initial cost of production is high and the slope of the marginal cost of undertaking innovation is moderate, investment in innovation is maximised at a patent protection that is weaker than the strongest patent protection. Otherwise, strongest patent protection maximises investment in innovation. We also show that welfare is maximised neither at the strongest patent protection nor at the weakest patent protection but at an intermediate patent protection. Our results are important for patent policies.

Journal Article Type Article
Publication Date Dec 1, 2014
Journal Australian Economic Papers
Print ISSN 0004-900X
Electronic ISSN 1467-8454
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 53
Issue 3-4
Pages 245-254
APA6 Citation Wang, L. F., & Mukherjee, A. (2014). Patent protection, innovation and technology licensing. Australian Economic Papers, 53(3-4), 245-254. doi:10.1111/1467-8454.12030
DOI https://doi.org/10.1111/1467-8454.12030
Publisher URL https://onlinelibrary.wiley.com/doi/full/10.1111/1467-8454.12030
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