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Step by Step Innovation without Mutually Exclusive Patenting: Implications for the Inverted U

  • Norman Sedgley EMAIL logo
Veröffentlicht/Copyright: 16. Juni 2022
The B.E. Journal of Theoretical Economics
Aus der Zeitschrift The B.E. Journal of Theoretical Economics Band 23 Heft 1

Abstract

The step by step model of innovation is a benchmark model in research investigating the relationship between competition and innovation. The model assumes an industry can be in one of two states; leveled or unleveled. In an unleveled state the lagging firm is the only innovator. In a leveled state firms compete in a patent race. In this patent race successful innovation probabilities are mutually exclusive. This formulation provides mathematical tractability, but it has no other justification. I relax this assumption and use numerical simulation to demonstrate that allowing for non mutually exclusive success in innovation has important consequences for the inverted U relationship. The inverted U relationship is no longer a prediction of the model. In addition, the model predicts that patent measures will under count innovation from the leveled state, allowing for an inverted U relationship between competition and patenting under a narrow set of parameter restrictions. This theoretical exercise has important implications for understanding the current state of the empirical record on this topic.

Keywords: patent race; competition; binomial distribution
Corresponding author: Norman Sedgley, Sellinger School of Business, Management Loyola University Maryland, Baltimore, USA, E-mail:

The author is grateful to John Burger, Bruce Elmslie and two anonymous referees for their helpful comments and suggestions.

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Supplementary Material

The online version of this article offers supplementary material (https://doi.org/10.1515/bejte-2021-0112).

Received: 2021-09-07
Revised: 2022-04-24
Accepted: 2022-04-25
Published Online: 2022-06-16

© 2022 Walter de Gruyter GmbH, Berlin/Boston

Artikel in diesem Heft

  1. Frontmatter
  2. Research Articles
  3. Duty to Read vs Duty to Disclose Fine Print. Does the Market Structure Matter?
  4. Cobb-Douglas Preferences and Pollution in a Bilateral Oligopoly Market
  5. Epsilon-Efficiency in a Dynamic Partnership with Adverse Selection and Moral Hazard
  6. Management Turnover, Strategic Ambiguity and Supply Incentives
  7. Uninformed Bidding in Sequential Auctions
  8. Arrowian Social Equilibrium: Indecisiveness, Influence and Rational Social Choices under Majority Rule
  9. Family Ties and Corruption
  10. Social Efficiency of Entry in a Vertical Structure with Third Degree Price Discrimination
  11. Insufficient Entry and Consumer Search
  12. Quality Competition and Market-Share Leadership in Network Industries
  13. The Effects of Introducing Advertising in Pay TV: A Model of Asymmetric Competition between Pay TV and Free TV
  14. Redistributive Unemployment Benefit and Taxation
  15. Constrained Persuasion with Private Information
  16. A Dynamic Graph Model of Strategy Learning for Predicting Human Behavior in Repeated Games
  17. Relative Income Concerns, Dismissal, and the Use of Pay-for-Performance
  18. Delegation in Vertical Relationships: The Role of Reciprocity
  19. Step by Step Innovation without Mutually Exclusive Patenting: Implications for the Inverted U
  20. Data and Competitive Markets: Some Notes on Competition, Concentration and Welfare
  21. Notes
  22. Optimality of a Linear Decision Rule in Discrete Time AK Model
  23. Equilibrium Pricing under Concave Advertising Costs
https://doi.org/10.1515/bejte-2021-0112
Schlagwörter für diesen Artikel
patent race; competition; binomial distribution

Artikel in diesem Heft

  1. Frontmatter
  2. Research Articles
  3. Duty to Read vs Duty to Disclose Fine Print. Does the Market Structure Matter?
  4. Cobb-Douglas Preferences and Pollution in a Bilateral Oligopoly Market
  5. Epsilon-Efficiency in a Dynamic Partnership with Adverse Selection and Moral Hazard
  6. Management Turnover, Strategic Ambiguity and Supply Incentives
  7. Uninformed Bidding in Sequential Auctions
  8. Arrowian Social Equilibrium: Indecisiveness, Influence and Rational Social Choices under Majority Rule
  9. Family Ties and Corruption
  10. Social Efficiency of Entry in a Vertical Structure with Third Degree Price Discrimination
  11. Insufficient Entry and Consumer Search
  12. Quality Competition and Market-Share Leadership in Network Industries
  13. The Effects of Introducing Advertising in Pay TV: A Model of Asymmetric Competition between Pay TV and Free TV
  14. Redistributive Unemployment Benefit and Taxation
  15. Constrained Persuasion with Private Information
  16. A Dynamic Graph Model of Strategy Learning for Predicting Human Behavior in Repeated Games
  17. Relative Income Concerns, Dismissal, and the Use of Pay-for-Performance
  18. Delegation in Vertical Relationships: The Role of Reciprocity
  19. Step by Step Innovation without Mutually Exclusive Patenting: Implications for the Inverted U
  20. Data and Competitive Markets: Some Notes on Competition, Concentration and Welfare
  21. Notes
  22. Optimality of a Linear Decision Rule in Discrete Time AK Model
  23. Equilibrium Pricing under Concave Advertising Costs
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