Working Paper: NBER ID: w1674
Authors: Gene M. Grossman; Carl Shapiro
Abstract: We study a simple, two-stage, stochastic patent race involving two firms. We examine the behavior of the participants as they gain the lead or fall behind in the race. We find that the leader engages in R&D more intensively than does the follower, and that both firms intensify their efforts if the follower does catch up with the leader. We also analyze (1) the attractiveness of licensing, whereby the leader shares his results with the follower,(2) a policy of issuing patents for intermediate research results, and (3) the effects of research joint ventures, whereby the firms coordinate their initial research efforts and share their results.
Keywords: R&D; patent race; competition; licensing; joint ventures
JEL Codes: O31; O32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Leader R&D intensity (O39) | Follower R&D intensity (O32) |
| Leader R&D intensity (O39) | Leader's probability of success (D79) |
| Follower R&D intensity (O32) | Leader's probability of success (D79) |
| Follower R&D intensity (O32) | Joint profits (D33) |
| Licensing agreements (L24) | Joint profits (D33) |
| Competitive pressure (L11) | R&D intensity of both firms (O32) |
| R&D expenditures (O32) | Industry R&D efficiency (O32) |