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THE ESCAPE-INFRINGEMENT EFFECT OF BLOCKING PATENTS ON INNOVATION AND ECONOMIC GROWTH

Published online by Cambridge University Press:  23 November 2011

Angus C. Chu
Affiliation:
Durham Business School, Durham University and Shanghai University of Finance and Economics
Shiyuan Pan
Affiliation:
Zhejiang University
Corresponding
E-mail address:

Abstract

This study develops a Schumpeterian growth model to analyze the effects of different patent instruments on innovation. We first analyze patent breadth, which captures the traditional positive effect of patent rights on innovation. Then, we consider a profit-division rule between entrants and incumbents. Given the division of profit, increasing the share of profit assigned to incumbents reduces entrants' incentives for innovation. This aspect of blocking patents captures the recently proposed negative effect of patent rights on innovation. Finally, blocking patents generate a nonmonotonic effect on innovation when the step size of innovation is endogenous because of a novel escape-infringement effect. Calibrating the model to aggregate data, we find that a marginal increase in the blocking effect of patent protection is likely to enhance economic growth.

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Copyright © Cambridge University Press 2011 

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THE ESCAPE-INFRINGEMENT EFFECT OF BLOCKING PATENTS ON INNOVATION AND ECONOMIC GROWTH
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