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Intellectual Property Rights and the Knowledge Spillover Theory of Entrepreneurship. EEA-ESEM Conference 27 August 2009 Barcelona. Zoltan Acs George Mason University Max Planck Institute of Economics Fairfax (VI) Mark Sanders Utrecht School of Economics Max Planck Institute of Economics - PowerPoint PPT Presentation
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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
dttiπeTVTVT
ttrnq ),()()( )(
Auction off ideas at willingness to pay:
),(
),(
&
&
DR
DR
Lqfq
Lnfn
Produce ideas according to:
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)
Producers of final good C
Consumers of final good C
Producers of n intermediate
goods
Capital Market
Labor Market
Our Model (Acs and Sanders 2009)
tttt
tτ
tτρ
E
BCrBYts
τdCet
:..
)log(:max )(
ρrCC tt /
Consumers (standard)
Our Model (Acs and Sanders 2009)
Final Goods Producers
w
Xβl jj
wXβ
L
)(
0
1),()()()(:..tn
i
βαj
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tLtLtX RjPjj
0
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0)(),(),(
),(),()()()()(max
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i
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0
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)(
)()(
0
1
1
)()()()( 1 tLtntAtA Rjγγ
jj
Our Model (Acs and Sanders 2009)
Final Goods Producers (R&D)
Rjγγ
jjj
j
jjt
Rjγγ
jjγγ
n
i
βαj
βPj
αj
rtj
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j
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Rj
j
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LnAλγξnAγψixLAeλA
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)1(Π)(
)Π(0
Rjγγ
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n
i
βαj
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rtj LnAλixiχLLwξLnAψixLAeH
1
00
1 )()(Π)(
nnγwwr
nAψξrXαw
RR
γγjj
Rj //
)Π)Π/Π((
Our Model (Acs and Sanders 2009)
Intermediate Goods Producers
)()()()(:max)(
irKixiχiπiχ
Xβα
iχ
iχix
iKix
n
i
βαβα
βαD )1(
)(
)()(
)()(
0
1
1
βαr
iχ
1
)(n
Xβαβαiπ
)1)(()(
Our Model (Acs and Sanders 2009)
Intermediate Goods Producers (Entry)
dttntX
eβαβαdttiπeTVT
rt
T
rtE )(
)()1)((),()(
Eδδ LnAφn 1
€
˜ w R =(α + β )(1−α − β )(1−ξ ˙ A / A)
r + ˙ n /n − ˙ X / XφAδ n−δ X
Entry-Arbitrage:
Our Model (Acs and Sanders 2009)
Equilibrium in educated labor market:
€
wR = w R = ˜ w R
Our Model (Acs and Sanders 2009)
Equilibrium
A/n
1
A/n*
AAnn //0
0// AAnn
ww~
Our Model (Acs and Sanders 2009)
Equilibrium Steady State:
)/( nnfnA
γδ
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R
nA
ψφ
LL
βαβα
nn
ρrww
BB
CC
XX
KK 2
ER
P
LL
LL
1
;*
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.