Cumulative Innovation, Sampling and the Hold-Up Problem

Pollock, Rufus (2006): Cumulative Innovation, Sampling and the Hold-Up Problem.

Abstract

With cumulative innovation and imperfect information about the value of innovations, intellectual property rights can result in hold-up and therefore it may be better not to have them. Extending the basic cumulative innovation model to include `sampling' by second-stage firms, we find that the lower the cost of sampling, or the larger the differential between high and low value second-stage innovations, the more likely it is that a regime without intellectual property rights will be preferable. Thus, technological change which reduces the cost of encountering and trialling new `ideas' implies a reduction in the socially optimal level of rights such as patent and copyright.

• Item Type: MPRA Paper
• Institution: Cambridge University
• Language: English
• Keywords: Cumulative Innovation; Hold-Up; Sampling; Intellectual Property
• Subjects: L - Industrial Organization > L5 - Regulation and Industrial Policy; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; K - Law and Economics > K3 - Other Substantive Areas of Law

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