Incentives for product and process innovations: a case for the drug industry

Bhan, Aditya and Kabiraj, Tarun (2014): Incentives for product and process innovations: a case for the drug industry.

Abstract

We consider an interaction of competing firms in an integrated world market and study their R&D incentives under each of product patent and process patent regimes. We follow a framework generally observed in the drug industry. We show that product patent regime leads to a larger R&D investment. Consumers may also benefit from product patenting. However, if the number of goods is large enough, the choice of patent regime loses significance with respect to R&D incentives.

• Item Type: MPRA Paper
• Language: English
• Keywords: Innovation; process patenting; product patenting; drug industry
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O34 - Intellectual Property and Intellectual Capital

References

Banerjee, S. and T. Kabiraj (2011), “Optimal Patent length in a North-South Framework: A Comment”, Singapore Economic Review 6, 51-59.

Chin, J.C. and G.M. Grossman, (1991). “Intellectual Property Rights and North-South Trade” in R.W. Jones and A.O. Krueger (eds.), The Political Economy of International Trade: Essays in Honor of R. E. Baldwin (Cambridge: Mass. Basil Blackwell), 90-107.

Cohen, W.M. and S. Klepper (1996), “Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D”, Review of Economics and Statistics 78, 232-243.

Deardorff, A. V. (1990). “Should Patent Protection Be Extended to All Developing Countries?”, The World Economy 13, 497-508.

Deardorff, A. V. (1992). “Welfare Effects of Global Patent Protection”, Economica 59, 35-51.

Diwan, I. and D. Rodrik. (1991). “Patents, Appropriate Technology and North South Trade”, Journal of International Economics 30, 27-47.

Fritsch, M. and M. Meschede (2001), “Product Innovation, Process Innovation, and Size”, Review of Industrial Organization 19, 3350350.

Greenaway, D. and A. Sapir (1992), “New Issues in the Uruguay Round Services, TRIMs and TRIPs”, European Economic Review 36, 509-518.

Kabiraj, T. (2000). “Providing Protection to Foreign-Owned Patents - A Strategic Decision”, Keio Economic Studies 37, 9-24.

Kabiraj, T. (1994), “Intellectual Property Rights, TRIPs, and Technology Transfer”, Economic and Political Weekly, Nov., 19, 2990-2998.

Kabiraj, T. and K. Banerjee (2002). “Will All Southern Countries Extend Patent Protection to Northern Innovations?”, Keio Economic Studies 39, 87-98.

Kraft, K. (1990), “Are Product- and Process Innovation Independent of each Other?”, Applied Economics 22, 1029-1038.

Marjit, S. and H. Beladi (1998), “Product vs. Process Patents: A Theoretical Approach”, Journal of Policy Modeling 20, 193-199.

Maskus, K. E. (1990). “Normative Concerns in the International Protection of Intellectual Property Rights”, The World Economy 13, 387-409.

Mathew, A.J. and A. Mukherjee (2014), “Intellectual Property Rights, Southern Innovation and Foreign Direct Investment”, International Review of Economics and Finance 31, 128-137.

Mukherjee, A and A. Ray, (2007), “Patents, Imitation and Welfare”, Economics of Innovation and New Technology 16, 227-236.

Mukherjee, A. and U. B. Sinha (2013), “Patent Protection, Southern Innovation and Welfare in a North-South Trade Model”, Economica 80, 248-273.

Sakakibara, M. and L. Branstetter (2001), “Do Stronger Patents Induce More Innovation? Evidence from the 1988 Japanese Patent Law Reforms”, Rand Journal of Economics 32, 77-100.

Subramanian, A. (1991), “The International Economics of Intellectual Property Right Protection: A Welfare-Theoretic Trade Policy analysis”, World Development 19, 945-956.

Vishwasrao, S. (1999), “TRIPS and Product vs. Process Innovation”. Atlantic Economic Journal 27, 444-459.

Yang, Y. (1998). “Why do Southern Countries Have Little Incentive to Protect Northern Intellectual Property Rights?”, Canadian Journal of Economics 31, 800-816.