NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Intellectual Property Rights, the Pool of Knowledge, and Innovation

Joseph E. Stiglitz

NBER Working Paper No. 20014
Issued in March 2014, Revised in March 2014
NBER Program(s):Public Economics, Productivity, Innovation, and Entrepreneurship

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.

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Document Object Identifier (DOI): 10.3386/w20014

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