Working Paper: NBER ID: w20014
Authors: Joseph E. Stiglitz
Abstract: The pace of innovation is related both to the level of investment in innovation and the pool of knowledge from which innovators can draw. Both of these are endogenous: Investments in innovations are affected by the pool of knowledge and the ability of firms to appropriate the returns to their innovative activity, itself affected by the intellectual property rights (IPR) regime. But as each firm engages in research, it both contributes to the pool, and takes out from it. The strength and design of IPR affects the extent to which any innovation adds to or subtracts from the pool of ideas that are available to be commercially exploited, i.e. to the technological opportunities. We construct the simplest possible general model to explore the resulting dynamics, showing that, under plausible conditions, stronger intellectual property rights may lead to a lower pace of innovation, and more generally, that long run effects may be the opposite of the short run effects.
Keywords: Intellectual Property Rights; Innovation; Knowledge Pool; R&D Investments
JEL Codes: E61; H41; O3; O31; O32; O33; O34; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Stronger IPR (O34) | Lower pace of innovation (O39) |
| Increased investments in R&D (O39) | Lower pace of innovation (O39) |
| Stronger IPR (O34) | Reduced knowledge pool (D80) |
| Reduced knowledge pool (D80) | Lower pace of innovation (O39) |
| Stronger IPR (O34) | Increased investments in R&D (O39) |
| Increased competition from more firms (L19) | Lower pace of innovation (O39) |
| Design of IPR regimes (O34) | Ambiguous relationship between IPR and innovation (O34) |