Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 792: Patent Scope and Technology Choice

Erika Färnstrand Damsgaard ()
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Erika Färnstrand Damsgaard: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: This paper analyzes the effect of an increase in patent scope on R&D and innovation. It presents a model where patent scope affects an entrant firm's technology choice and thereby creates a trade-off between R&D investments and wasteful duplication of R&D. The model predicts that an increase in patent scope can increase the probability of innovation if the incumbent’s profit increase from innovation is large and the patented technology has a small advantage over the alternative technology. However, when the model is extended to Stackelberg competition or licensing, the benefit of a broad patent scope to a large extent disappears.

Keywords: Innovation; Patents; Patent policy; Licensing

JEL-codes: K20; L51

39 pages, March 3, 2009

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