Rewarding innovation efficiently: Research spill-overs and exclusive IP rights

Posted by D. Daniel Sokol

Vincenzo Denicol (Indira Gandhi Institute of Development Research) and Luigi A. Franzoni (Indira Gandhi Institute of Development ResearchInstitute of Economic Growth) address Rewarding innovation efficiently: Research spill-overs and exclusive IP rights.

ABSTRACT: We investigate the conditions for the desirability of exclusive intellectual property rights for innovators as opposed to weak rights allowing for some degree of imitation and ex-post competition. The comparison between the two alternatives reduces to a specific "ratio test," which suggests that strong exclusive IP rights are preferable when competition from potential imitators is weak, the innovation attracts large R&D investments, and research spill-overs are small.