Yang, Yibai and Zhang, Haoyu (2010): Outsourcing and R&D Investment with Costly Patent Protection.
This is the latest version of this item.
Download (242Kb) | Preview
We analyse decisions of firms on outsourcing of intermediate goods and R&D investment. If firms choose in-house production, a high profit discount is incurred due to the inefficiency of producing the intermediate goods, whereas if firms search for and outsource to specialists, the production costs decrease, but an imitation risk arises by specialists, who may become competitors in the final-good market. Accordingly, patents are used to mitigate this possibility, which are costly. We show that in outsourcing, all firms outsource to the same specialist to minimise the possibility of successful imitation in equilibrium. Moreover, firms still invest in R\&D activities and outsource their intermediate goods with some patent protection even though the selected specialist put effort into imitation.
|Item Type:||MPRA Paper|
|Original Title:||Outsourcing and R&D Investment with Costly Patent Protection|
|Keywords:||Patents; Outsourcing; Imitation.|
|Subjects:||D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory
D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights
|Depositing User:||Yibai Yang|
|Date Deposited:||04. Nov 2010 09:28|
|Last Modified:||16. Feb 2013 01:07|
Acemoglu, D., P. Aghion, and F. Zilibotti (2003): "Vertical Integration and Distance to Frontier," Journal of the European Economic Association, 1(2-3), 630-638.
Aghion, P., and J. Tirole (1994): "The Management of Innovation," Quarterly Journal of Economics, 109(4), 1185-1209.
Aghion, P., and J. Tirole (1997): "Formal and Real Authority in Organizations," Journal of Political Economy, 105(1), 1-29.
Antras, P. (2003): "Firms, Contracts, and Trade Structure," Quarterly Journal of Economics, 118(4), 1375-1418.
Antras, P. (2005): "Incomplete Contracts and the Product Cycle," American Economic Review, 95(4), 1054-1073.
Antras, P., and E. Helpman (2004): "Global Sourcing," Journal of Political Economy, 112(3), 552-580.
Baccara, M. (2007): "Outsourcing, Information Leakage, and Consulting Firms," RAND Journal of Economics, 38(1), 269-289.
Coase, R. H. (1937): "The Nature of the Firm," Economica, 4(16), 386-405.
Dean, J. (2007): "The Forbidden City of Terry Gou," Wall Street Journal, August 11, p.A1.
Gallini, N. T. (1992): "Patent Policy and Costly Imitation," RAND Journal of Economics, 23(1), 52-63.
Grossman, G. M., and E. Helpman (2002): "Integration versus Outsourcing in Industry Equilibrium," Quarterly Journal of Economics, 117(1), 85-120.
Grossman, G. M., and E. Helpman (2005): "Outsourcing in a Global Economy," Review of Economic Studies, 72(1), 135-159.
Grossman, S. J., and O. D. Hart (1986): "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, 94(4), 691-719.
Hart, O., and J. Moore (1990): "Property Rights and the Nature of the Firm," Journal of Political Economy, 98(6), 1119-58.
Holmstrom, B., and J. Roberts (1998): "The Boundaries of the Firm Revisited," Journal of Economic Perspectives, 12(4), 73-94.
Hunt, R. M. (1999): "Nonobviousness and the Incentive to Innovate: An Economic Analysis of Intellectual Property Reform," Federal Reserve Bank of Philadelphia Working Papers, 06(06).
Hunt, R. M. (2006): "When Do More Patents Reduce R&D?," American Economic Review Papers and Proceedings, 96(2), 87-91.
Klein, B., R. G. Crawford, and A. A. Alchian (1978): "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, 21(2), 297-326.
Kotabe, M., M. J. Mol, and S. Ketkar (2008): "An Evolutionary Stage Model of Outsourcing and Competence Destruction: A Triad Comparison of the Consumer Electronics Industry," Management International Review, 48(1), 65-94.
Lai, E., R. Riezman, and P. Wang (2009): "Outsourcing of Innovation," Economic Theory, 38(3), 485-515.
Lemley, M. A. (2001): "Rational Ignorance at the Patent Office," Northwestern University Law Review, 95(4), 1495-1532.
Partner, S. (1999): Assembled in Japan: Electrical Goods and the Making of the Japanese Consumer. University of California Press.
U.S. Federal Trade Commission (2003): "To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy," Washington, DC: U.S. Federal Trade Commission, 99(3).
Williamson, O. E. (1975): Markets and Hierarchies, Analysis and Antitrust Implications: A Study in the Economics of Internal Organization. Free Press (New York).
Williamson, O. E. (1985): The Economic Institutions of Capitalism. Free Press (New York).
Available Versions of this Item
Outsourcing and R&D Investment with Costly Patent Protection. (deposited 28. Sep 2010 20:10)
Outsourcing and R&D Investment with Costly Patent Protection. (deposited 25. Oct 2010 00:40)
- Outsourcing and R&D Investment with Costly Patent Protection. (deposited 04. Nov 2010 09:28) [Currently Displayed]
- Outsourcing and R&D Investment with Costly Patent Protection. (deposited 25. Oct 2010 00:40)