Competition, Imitation, and R&D Productivity in a Growth Model with Industry-Specific Patent Protection

Abstract

Recent empirical studies suggest a need for a flexible patent regime responding to industry differences. In practice, industry-specific modifications of patent length already exist but lack theoretical foundation. This paper intends to make up for this neglect by scrutinizing in what direction industry characteristics influence optimal patent length. It is found that patents ought to be shorter, the more intense competition, the higher R&D productivity, and the more intricate reverse engineering in an industry are. Unlike similar Schumpeterian growth models, this model assumes Cournot competition and introduces an empirically substantiated measure of industry differences in the ability to catch up with a technological leader. It is found that for most empirically plausible cases the familiar inverted-U relation between patent length and growth carries over to the Cournot set-up.