Intellectual Property Rights and the Knowledge Spillover Theory of Entrepreneurship
Zoltan AcsGeorge Mason University
Max Planck Institute of EconomicsFairfax (VI)
Mark SandersUtrecht School of Economics
Max Planck Institute of [email protected]
EEA-ESEM Conference27 August 2009Barcelona
MotivationSchumpeter and Modern Endogenous Growth Theory:
The Entrepreneur and the InventorOpportunities and IdeasInnovation and InventionWho gets the rents of innovation?
But does it really matter in the end?
Intellectual Property Rights Protection:Patents and the Bargain over RentsProviding Incentives for Knowledge CreationHurting Incentives for Knowledge CommercializationOutcomes
Outline
Patents and the US Patent Reform:HistoricalThe Rationale for Patent ProtectionThe Debate on Optimal Patent Protection
Modern Endogenous Growth Theory:The Basic Model StructureResults on Patent Protection Policy
Entrepreneurship, Knowledge Spillovers and Growth:
Our Model and ContributionOur Results on Patent Protection Policy
PatentsHistorical:
Royal Favor and RevenueInventions and InnovationsKnowledge and Ideas Recent US reforms
Federal Appeals CourtFinance PTO out of Fees on Patents Granted
The Rationale:Knowledge creation is source of growth…… and patents reward knowledge creation……so patent protection stimulates growth.
The Debate (e.g J&L (2004) vs K&E (2003)):Is stronger protection always better?Static loss versus dynamic gains
Incentives and dynamic loss
Growth and IdeasBasic Structure: Consumers
1. Willing to save2. Demand for innovations
Basic Structure: Producers1. Make profit (imperfect competition)
2. Demand production factors
Growth and IdeasBasic Structure: Inventors/Innovators
1. Make zero-profit (free entry)2. Need to demand R&D factors
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Growth and IdeasBasic Structure:
1. Growth is positive for positive R&D2. Sub-optimal in case of spillovers
Intra-temporal knowledge spilloversInter-temporal knowledge spilloversPositive steady state growth requires:
latent demand for innovationimperfect competition appropriation of rents by new knowledge creatorsincreasing returns to scale in aggregate production
Optimal growth requires: stimulation of knowledge creationpatent protection to internalize positive spillovers
Our Model (Acs and Sanders 2009)
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Our Model (Acs and Sanders 2009)
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Our Model (Acs and Sanders 2009)
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Our Model (Acs and Sanders 2009)
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Our Model (Acs and Sanders 2009)
New Features:Captures spin-out/offCaptures upstream spillovers (specialization)
Captures downstream spillovers (opportunities) Residual rents reward commercializationTransfer of rents from innovators to inventors
Results in line with new growth theory:Growth Sub-OptimalCase for R&D and Entrepreneurs subsidyR&D more than EntrepreneursMore patent protection means more R&D…
Results in contrast to new growth theory:…but also less commercialization.Too much protection leads to lower innovation Distinguishing entrepreneurs makes a difference
Our ContributionsIn the tradition of Schumpeter we:…separate commercialization and invention,…allocate the residual rents to the entrepreneur,…assume opportunity to be a spillover.
In the tradition of Romer we:…see patents as (imperfect) claims to rents,…that incentivize knowledge creation.
And we show that:…patents are not needed to incentivize all R&D and……may reduce incentives to commercialize……so patent protection may overshoot its target……as Jaffe and Lerner (2004) argue it has in the US.A better policy would support R&D and entrepreneurs……by clearing the knowledge filters between them.