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,\ ø 1 I I i ,i
Eco
nom
ics,
Law
and
Inte
llect
ual P
rope
rty
Seek
ing
Stra
tegi
~s f
or R
esea
rch
and
Tea
chin
g in
la D
evel
opin
g Fi
eld
Edi
ted
by
Ove
Gra
nstr
and
Cen
ter
for
Inte
llect
ual P
rope
rty
Sidi
es,
Dep
artm
ent o
f Ind
ustr
ial M
anag
e en
t & E
cono
mic
s,Chalmers University of
Tec
hno
log
, Göt
ebor
g, S
wed
en
li. " KL
UW
ER
AC
AD
EM
ICt P
UB
LIS
HE
RS
BO
ST
ON
/ D
OR
DR
EC
HT
/ Lc
bND
ON
A C
.i,P,
Cat
alog
ue r
ecor
d fo
r th
is b
ook
is a
vaila
ble
from
the
Lib
rary
of
Con
gres
s,T
able
of
Con
tent
s
Lis
t of
Con
trib
utor
s ...
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ix
Fore
wor
d....
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...1
Pre
face
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3
All
Rig
hts
Res
erve
d(f
200
3 K
luw
er A
cade
llc P
ublis
hers
, Bos
ton
No
par
of th
s w
ork
may
be
repr
oduc
ed, s
tore
d in
a r
etre
val s
yste
m, o
r tr
anSl
ltted
in any form or by any means, electronic, mechancal, phJtocopyin5, llcrofillng,
reco
rdin
g or
oth
erw
ise,
with
out w
ritte
n pe
rnss
ion
from
the
Pub
lishe
r, w
ith th
e ex
cept
ion
of a
ny m
ater
ial s
uppl
ied
spec
ific
ally
for
the
purp
ose
of b
eing
ent
ered
and
exec
uted
on
a co
mpu
ter
syst
em, f
or e
xclu
sive
use
by
the
purc
hase
r of
the
wor
k,
Prol
ogue
.....
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.....7
1 In
nova
tions
and
Inte
llect
ual P
rope
rty
Stu
dies
.....
......
......
......
......
......
......
......
......
.... 9
1.1
Inno
vatio
ns, L
aws
and
Eco
nolle
s in
Inte
ract
ion
......
......
......
......
......
......
..,...
......
......
...' 1
11.
2 T
he N
eed
for
Eco
nom
ics
and
Law
in In
tera
ctio
n fo
r In
nova
tions
....,
......
......
......
......
.., 1
71.
3 T
he G
row
th o
f IP
Stu
dies
,..,.
......
......
.,....
..,...
......
......
......
.,....
......
......
......
......
.....,
..,...
....2
21,
4 O
utlin
e of
the
Boo
k ,..
,.....
......
,..,..
......
.,....
......
......
......
......
......
....,.
.....,
..,...
......
.....,
......
.... 3
01.
5 L
itera
ture
Ref
eren
ces.
...",
""'"
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,..".
.",..
...."
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......
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"", .
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. 39
2 E-Commerce: The Consumer, the Trade Mark and the Credit Card.....................
412,
1 In
trod
uctio
n ...
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......
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."".
.....,
......
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......
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., 41
2,2
Wha
t is
a W
ell-K
now
n T
rade
Mar
k? ..
......
......
.,....
....,.
......
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..,...
. 44
2,3
Dom
ain
Nam
es ..
......
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..,...
......
"..,.
.,....
......
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.."..,
,.....
......
.....4
72.
4 C
onsu
mer
Pro
tect
ion
Legi
slat
ion,
..,..
......
,.."
....,.
.,....
...."
"....
.... .
....."
" ...
."...
.,..,.
.',.."
"....
48
3 In
telle
ctua
l Pro
pert
y Sc
ope:
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..55
3,1
Dev
elop
men
t of I
ntel
lect
ual P
rope
rty.
.,....
..,...
......
......
...,..
,.....
......
......
......
......
......
...,..
... 5
63,
2 W
TO
fIIP
s, ..
....."
"..,.
., ...
......
..,..'
...."
.., ,.
......
."".
.'", ,
....,
....."
..""
......
,..".
.,..,
......
... _
"",..
59
3,3
lRIP
s' R
elat
ion
to N
atio
nal L
egal
Cul
ture
......
......
,.....
......
......
......
......
,.....
......
...,..
......
.. 63
3.4
Dire
ctio
ns fo
r th
e F
utur
e,...
......
.,....
...,..
.."...
......
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......
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......
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. 72
3.5
Con
clus
ions
.....
.,....
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....,.
......
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...."
""",
,....
,..."
",...
.."".
., ...
....."
"""
......
..,,'.
. 75
4 M
arke
ts fo
r T
echn
olog
y an
d C
orpo
rate
Str
ateg
y....
......
......
......
......
......
......
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.... 7
74,
1 In
trod
uctio
n,..,
..,..
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......
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.."..'
" ...
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'.., .
.....,
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.....
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.. 78
4,2 Markets for Technology: Definition and Suggestive
Evi
denc
e ...
......
......
......
.,....
..,...
....7
94.
3 T
he E
ffec
ts o
f "M
issi
ng"
Tec
hnol
ogy
Mar
kets
on
Cor
pora
te D
ecis
ions
.....
......
.,....
....,
844.
4 Li
cens
ing
and
IP M
anag
emen
t in
Larg
e F
irms
......
......
......
......
......
..,...
.....,
......
......
......
.. 87
4,5
Incr
easi
ng Im
port
ance
of "
Inte
llect
ual P
rope
rty"
Man
agem
ent..
......
......
,.....
......
......
... 8
94,
6 T
he D
iffe
rent
Cha
lleng
es F
aced
by
the
Smal
ler
Firm
s ...
......
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..,..,
......
......
,.....
......
.....
914,7 The External Acquisition of
Tec
hnol
ogy
and
the
"Not
-Inv
ente
d-H
ere"
Syn
drom
e....
.. 95
4,8
Indu
stry
-Lev
el E
ffect
s: V
ertic
al S
peci
aliz
atio
n, E
ntry
and
Com
petit
ion.
......
......
,.....
... 9
64.
9 C
oncl
usio
ns ..
.., ..
......
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....,.
..., .
.....,
.." ..
......
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.....,
...""
.."",
....,.
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.....
.....,
104
4,10
Lite
ratu
re R
efer
ence
s..,.
......
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...,..
"....
..,...
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..",..
..,...
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." 1
06
5 N
ew In
tern
atio
nal A
rran
gem
ents
in In
telle
ctua
l Pro
pert
yan
d C
ompe
titio
n L
aw ..
......
....._
......
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.109
Lic
ensi
ng a
nd L
ever
age.
......
.,..,.
.,....
,.....
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...,..
,.....
.,....
...",
"....
,.....
..., 1
11R
esea
rch
Too
ls, B
road
Pat
ents
, and
Pre
empt
ion.
......
......
......
......
......
......
..,...
......
......
... 1
14O
ligop
olie
s, C
ross
Lic
ense
s, a
nd M
arke
t Ent
ry...
......
......
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......
....,.
.....,
..,...
......
...,..
.. 11
5St
ruct
ural
and
Ins
titut
iona
l Iss
ues.
......
......
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....,.
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. 118
5,1
5.2
5.3
5,4
6R
&D
Inf
orm
atio
n Fl
ows
and
Pate
ntin
g in
Jap
anan
d th
e U
lUte
d S
tate
s, ..
......
....._
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123
Intr
oduc
tion,
.,..
'..""
,."."
,.,."
""",
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., ."
", ..
......
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.....,
.."""
"" "
......
""""
. ,.,.
." .,
." 1
24M
etho
d, D
ata
and
Sam
ples
.....
.....,
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......
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......
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,....,
.." 1
25In
trai
ndus
try
R&
D I
nfor
mat
ion
Flow
s an
d Sp
ilove
rs...
,.....
......
......
......
......
......
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.... 1
29
ISB
N 1
-402
0-77
08-4
Publ
ishe
d by
Klu
wer
Aca
dem
ic P
ublis
hers
,P.
O. B
ox 1
7, 3
300
AA
Dor
drec
ht, T
he N
ethe
rlan
ds.
Sold
and
dis
trbu
ted
in N
ort,
Cen
tral
and
Sou
th A
mer
ica
by K
luw
er A
cade
llc P
ublis
hers
,10
1 Ph
ilip
Dri
ve, N
orw
ell,
MA
020
61, U
,S,A
,
In a
ll ot
her
coun
tres
, sol
d an
d di
strb
uted
by K
luw
er A
cade
llc P
ublis
hers
,P.
O, B
ox 3
22, 3
300
AH
Dor
drec
ht, T
he N
ethe
rlan
ds,
Prin
ted
on a
cid-
free
pap
er
6,1
6,2
6,3
Prin
ted
in th
e N
ethe
rlan
ds,
v
i i \
Chapter 20
INT
EL
LE
CT
UA
L P
RO
PER
TY
RIG
HT
SIN
TH
E W
OR
LD E
CO
NO
Myi
Bar
t Ver
spag
enE
indh
oven
Cèn
ter
for
Inno
vatio
n St
udie
s (E
ClS
);University of
Technology, Department of
Tec
hnol
ogy
Man
agem
ent,
Ein
dhov
en, T
he N
ethe
rland
s
Cha
pter
con
tent
s: .
20, i
Int
rodu
ctio
n....
",,"
""""
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.,.. ,
...."
",..,
.." ..
.."...
...,..
", ,.
.".."
""".
...""
"",..
""...
.. 49
020
.2 T
echn
olog
y an
d th
e E
cono
my
....,.
......
......
......
...,..
......
...,..
......
......
......
......
......
......
......
. 492
20,3
Pat
ents
as
Ince
ntiv
es fo
r R
&D
.....
.,....
......
......
......
.,....
......
......
......
......
...,..
......
......
......
. 493
20.4
Pat
ents
and
Tec
hnol
ogy
Spi
love
rs...
......
......
,.....
.....,
....,.
......
......
......
..,...
......
.,....
......
... 4
9920
,5 P
aten
ts a
nd T
echn
olog
y T
rans
fer:
a S
hort
Rev
iew
of t
he D
ebat
e....
......
......
......
.....,
.... 5
0320
,6 D
iscu
ssio
n an
d Is
sues
for
Fur
ther
Res
earc
h ...
......
......
......
:.....
......
......
.,....
......
......
....,.
. 508
20,7 Literature References .. ......................."
""...
......
."".
......
.... 5
14
Abs
trac
t:T
his
chap
ter
broa
dly
sum
mar
zes
som
e of
the
basi
c ec
onom
ic th
eory
on
the
wor
king
of
the
pate
nt s
yste
m, I
t sta
rs b
y ou
tlini
ng th
e ro
le te
chno
logy
pla
ys in
economic development, and. the way in which economic theory has
appr
oach
ed th
e te
chno
logy
-eco
nom
y re
latio
nshi
p, I
t the
n re
view
s th
e ba
sic
econ
omic
mot
ive
for
esta
blis
hing
a p
aten
t sys
tem
: to
solv
e th
e in
cent
ive
prob
-le
m th
at f
irm
s fa
ce w
hen
they
dev
elop
new
tech
nolo
gies
with
pot
entia
l spi
l-ov
er e
ffec
ts to
oth
er f
irm
s an
d co
nsum
ers,
A d
iscu
ssio
n of
alte
rnat
ives
to th
epatent system is
also
pro
vide
d, F
rom
an
econ
omic
poi
nt o
f vi
ew, h
owev
er, a
cruc
ial a
spec
t of
pate
nts
is th
at th
ey le
ave
som
e op
port
nity
for
spi
love
rs, I
not
her
wor
ds, p
aten
ts s
houl
d no
t pro
vide
a p
ure
mon
opol
y to
the
inve
ntin
g fi
nn,
1 A
n ea
rlie
r ve
rsio
n of
this
cha
pter
was
pre
sent
ed a
t the
WIP
O A
rab
Reg
iona
l Sym
posi
um o
n
the
Eco
nom
ic I
mpo
rtan
ce o
f In
telle
ctua
l Pro
pert
y R
ight
s, M
usca
t, Su
ltana
te o
f O
man
, Feb
ru-
ar 22-24, 1999, I thank paricipants at the conference and Eddy Szirmai for useful com-
men
ts a
nd d
iscu
ssio
ns. T
he w
ork
for
this
cha
pter
was
spo
nsor
ed b
y th
e N
orw
egia
n R
esea
rch
Cou
ncil
unde
r th
e pr
ogra
me
"Glo
balis
enng
som
tran
sfon
nativ
kra
ft",
car
ed o
ut b
y T
IK.
489
0, G
rans
tran
d (e
d,),
Eco
nom
ics,
Law
and
Inte
llect
ual P
rope
rt, 4
89-5
18,
Eco
nom
ics.
Law
and
Int
elle
ctua
l Pro
pert
y
The
eco
nom
ic lo
gic
behi
nd th
is a
rgum
ent i
s ex
plai
ned
and
som
e ge
nera
l(a
nd a
bstr
act)
theo
retic
al g
uide
lines
are
pro
pose
d to
str
ike
a ba
lanc
e be
twee
npr
ovid
ing
ince
ntiv
es (
a le
gal m
onop
oly
for
the
inve
:itor
) an
d le
avin
g op
port
-ni
ty f
or s
pilo
vers
, The
cha
pter
con
clud
es w
ith a
sum
mar
y of
the
deba
tes
sur-
roun
ding
issu
es o
f pat
ents
(an
d IP
Rs
mor
e ge
nera
l) in
an
inte
rnat
iona
l con
text
.T
he r
ole
pate
nts
may
pla
y in
stim
ulat
ing
æch
nolo
gy tr
ansf
er is
rev
iew
ed. b
utal
so c
ritic
al r
emar
ks a
re m
ade
with
res
pect
to th
e ab
ilty
of a
str
ict p
aten
t sys
-te
m a
lone
to a
chie
ve te
chno
logi
cal d
evel
opm
ents
of
the
poor
est n
atio
ns,
20.1
Int
rodu
ctio
n
Inte
llect
ual p
rope
rty
righ
ts (
IPR
s) a
re h
igh
on th
e ag
enda
of
polic
y m
ak-
ers, academics and business firm, Now that knowledge and immaterial
products are becoming more and more important in the world economy,
IPR
s ar
e m
ore
cruc
ial t
han
ever
. With
rap
id te
chno
logi
cal d
evel
opm
ents
inm
any
fiel
ds, p
olic
y m
aker
s ar
e as
king
them
selv
es h
ow to
ada
pt th
e ex
istin
gsystems of IPRs to the changing circumstances, What guidance can eco-
nom
ic th
eory
giv
e th
em in
this
pro
cess
?E
spec
ially
in th
e pr
oces
s of
eco
nom
ic d
evel
opm
ent,
the
role
of
know
l-ed
ge c
an h
ardl
y be
und
eres
timat
ed, T
he e
cono
mic
his
tory
of t
he w
orld
show
s th
at, i
n th
e lo
ng r
un, o
nly
by a
pply
ing
new
pro
duct
ion
tech
niqu
es a
ndin
trod
ucin
g ne
w p
rodu
cts
can
the
leve
l of
wel
fare
be
incr
ease
d, T
he d
evel
-op
men
t of s
uch
new
pro
cess
es a
nd n
ew p
rodu
cts
is a
goa
l tha
t is
activ
ely
purs
ued
by b
oth
gove
rnm
ents
and
pri
vate
fir
ms,
In
light
of
the
deve
lopm
ent
issu
e, te
chno
logy
tran
sfer
from
dev
elop
ed to
dev
elop
ing
natio
ns is
a m
ajor
topi
c of
inte
rest
. IPR
s ar
e a
maj
or is
sue
in th
is r
espe
ct, w
ith tw
o po
tent
ially
conf
lictin
g im
plic
atio
ns, O
n th
e on
e ha
nd, I
PRs
are
dem
ande
d by
thos
e w
hoow
n th
e kn
owle
dge
to b
e tr
ansf
erre
d, s
o th
at s
ome
cont
rol o
ver
whe
re it
isdi
stri
bute
d re
mai
ns in
thei
r ha
nds,
On
the
othe
r ha
nd, t
hose
who
are
on
the
rece
ivin
g en
d of
the
know
ledg
e tr
ansf
er a
re a
frai
d th
at (
stro
ng)
IPR
s lim
itth
e tr
ansf
erre
d kn
owle
dge
and
its b
enef
icia
l app
licat
iom
,It
is th
e m
ain
ques
tion
of th
is c
hapt
er to
out
line
the
chie
f ec
onom
ic a
r-gu
men
ts in
this
deb
ate
arou
nd th
e ro
le o
f IP
Rs
in th
e w
orld
eco
nom
y. I
n or
-de
r to
pro
vide
a b
ackg
roun
d to
this
deb
ate,
it is
nec
essa
r to
est
ablis
h th
eec
onom
ic f
unct
ion
of p
aten
ts, T
hat w
il be
the
firs
t tas
k un
dert
aken
bel
ow, I
tw
il be
arg
ued
that
pat
ents
, mor
e th
an o
ther
for
ms
of I
PRs
(suc
h as
cop
y-rig
hts
and
trad
emar
ks),
are
impo
rtan
t for
the
dyna
mic
per
form
ance
of t
heec
onom
y,A
fun
dam
enta
l que
stio
n in
this
res
pect
is h
ow e
cono
mic
ana
lysi
s ca
ngu
ide
the
desi
gn o
f a
pate
nt s
yste
m, H
ere,
issu
es s
uch
as th
e pa
tent
leng
th
490
1 i I i 1 i
Bar
t Ver
spag
en
(dur
atio
n), b
read
th (
scop
e of
pro
tect
ion)
and
hei
ght (
nove
lty r
equi
rem
ents
)ar
e an
alyz
ed, A
lthou
gh th
ere
are
man
y fo
rmal
mod
els
of th
e pa
tent
sys
tem
that
can
hel
p in
out
linin
g th
e re
leva
nt e
cono
mic
pro
cess
es, t
hese
do
not o
f-fe
r, a
s w
il be
arg
ued
belo
w, v
ery
conc
rete
gui
danc
e, T
he m
ain
reas
on is
that
thes
e m
odel
s ar
e to
o ab
stra
ct to
be
appl
ied
in p
ract
ical
term
s, I
t wil
be a
r-gu
ed th
at o
nly
deta
iled
case
stu
dies
of
exis
ting
pate
nts
in c
ombi
natio
n w
ithth
e st
udy
of te
chno
logi
cal s
yste
ms
can
prov
ide
prac
tical
insi
ghts
into
how
broa
d pa
tent
s sh
ould
be,
With
this
bac
kgro
und
in th
e ec
onom
ic th
eory
of
pate
nts,
one
may
add
ress
the
issu
e of
the
role
of
IPR
s in
the
glob
al e
cono
my,
and
thei
r im
plic
atio
ns f
orth
e pr
ospe
cts
of d
evel
opin
g na
tions
, The
dis
cuss
ions
aro
und
this
issu
e ar
edo
min
ated
by
the
role
of
the
mai
n in
stitu
tiona
l arr
ange
men
t tha
t has
em
erge
dov
er th
e la
st d
ecad
e: th
e so
-cal
led
TR
IPs
agre
emen
t. T
his
agre
emen
t, w
hich
has
been
inte
rwov
en in
to th
e ta
lks
on li
bera
lizin
g tr
ade
and
inve
stm
ent
flow
s, s
ets
a un
ifor
m m
inim
um le
vel o
f pa
tent
pro
tect
ion
for
all c
ount
ries
that participate in the World Trade Organization (WTO)
, Whe
ther
suc
h a
unif
orm
leve
l is
bene
fici
al f
rom
a g
loba
l poi
nt o
f vi
ew, a
nd w
heth
er o
r no
tth
e ac
tual
ly im
plem
ente
d m
inii:
um le
vel i
s to
o hi
gh, h
as b
een
a m
ajor
poi
ntof
deb
ate
ever
sin
ce th
e fi
rst p
lans
for
TR
IPs,
It i
s th
e ai
m o
f th
is p
aper
todi
scus
s th
e ec
onom
ic th
eory
aro
und
thes
e is
sues
, and
to u
se th
is th
eory
tode
rive
som
e co
nclu
sion
s on
whe
re th
e de
bate
cou
ld f
urth
er d
evel
op,
The
res
t of
this
pap
er is
org
aniz
ed a
s fo
llow
s, S
ectio
n 2
brie
fly
outli
nes
som
e de
velo
pmen
ts in
the
econ
omic
theo
ry o
n gr
owth
, It w
il be
arg
ued
that
pate
nts
play
a cr
ucia
l rol
e in
mod
em g
row
th (
theo
ry),
The
sec
tion
wil
also
intr
oduc
e th
e co
ncep
t of
tech
nolo
gy s
pilo
vers
, Sec
tion
3 w
il ou
tline
the
econ
omic
fun
ctio
ns o
f pa
tent
s, a
nd a
lso
intr
oduc
e th
e co
ncep
ts o
f pa
tent
breadth and patent length, Section 4 wil come back to the issue of spil-
over
s, a
nd th
eir
link
to p
aten
ts, T
he is
sue
of p
aten
t bre
adth
wil
be a
naly
zed,
taki
ng in
to a
ccou
nt th
e ec
onom
ic im
port
ance
of
spilo
vers
, Sec
tion
5 pr
o-vi
des
an o
verv
iew
of
the
mai
n fa
ctor
s th
roug
h w
hich
IPR
s ha
ve a
n im
pact
on
deve
lopm
ent a
nd te
chno
logy
tran
sfer
, Thi
s se
ctio
n al
so o
utlin
es th
e m
ain
deve
lopm
ents
at a
pra
ctic
al le
veL
, i.e
" ho
w in
tern
atio
nal I
PR r
egim
es c
on-
verg
ed in
to th
e T
RIP
s ag
reem
ent t
hat h
as b
een
in e
ffec
t sin
ce 1
996.
Sec
tion
6 pr
ovid
es a
sum
mar
y an
d di
scus
sion
of
the
mai
n ar
gum
ents
, Som
e sp
ecif
icre
com
men
datio
ns w
il be
mad
e w
ith r
egar
d to
sup
port
ive
polic
ies
in th
e fi
eld
of in
tern
atio
nal I
PRs,
491
Eco
nom
ics,
Law
and
Int
elle
ctua
l Pro
pert
y
20.2
Tec
hnol
ogy
and
the
Eco
nom
y
The
impo
rtan
ce o
f te
chno
logy
for
eco
nom
ic g
row
th is
obv
ious
to a
ny-
body
who
has
eve
n a
vagu
e no
tion
of th
e hi
stor
y of
tech
nolo
gy o
r th
e hi
stor
yof
the
wor
ld e
cono
my,
The
pro
long
ed g
row
th o
f GD
P p
er c
apita
(w
hich
,ad
mitt
edly
, is
an im
perf
ect m
easu
re o
f w
hat m
atte
rs f
or th
e qu
ality
of
hum
anlif
e) s
ince
the
(fir
st)
Indu
stri
al R
evol
utio
n w
as m
ade
poss
ible
by
a co
mbi
na-
tion
of e
ntir
ely
new
pro
cess
es a
nd n
ew p
rodu
cts,
whi
ch k
ept b
eing
intr
o-du
ced
into
the
econ
omy
at w
hat a
ppea
rs to
hav
e be
en a
n in
crea
sing
rat
e (s
ee,
e,g.
, Lan
des,
196
9, M
addi
son,
199
1 an
d Fr
eem
an a
nd S
oete
, 199
7),
Des
pite
the
load
of
hist
oric
al e
vide
nce,
(m
ains
trea
m)
econ
omic
theo
ry,
how
ever
, unt
il ve
ry r
ecen
tly, w
as n
ot v
ery
com
fort
able
with
the
rela
tion
be-
twee
n ec
onom
ic g
row
th a
nd te
chno
logy
, For
mal
theo
rist
s as
eco
nom
ists
are
toda
y, th
ey w
ere
rath
er u
neas
y w
ith th
e 'q
ualit
ativ
e' w
ork
by 'p
re-m
odem
'ec
onom
ists
suc
h as
Mar
x (1
981)
and
Sch
umpe
ter
(193
9), w
ho h
ad k
ept
clos
er li
nks
with
the
hist
oric
al e
vide
nce
and
give
n te
chno
logy
a c
entr
al r
ole
in th
eir
anal
ysis
,T
he d
omin
ant t
heor
y of
eco
nom
ic g
row
th (
Solo
w, 1
956)
was
bas
ed o
nth
e co
rner
ston
e of
all
mod
em e
cono
mic
ana
lysi
s, n
amel
y th
at o
f 'd
ecre
asin
gm
agin
al r
etur
ns'.
Thi
s no
tion
refe
rs to
the
fact
that
if o
ne k
eeps
add
ing
mor
ean
d m
ore
capi
tal (
mac
hine
s, b
uild
ings
) to
a p
rodu
ctio
n pr
oces
s, th
e ad
di-
tiona
l val
ue g
ener
ated
by
this
cap
ital w
il ke
ep f
alln
g, u
ntil
it ev
entu
ally
be-
com
es z
ero.
Thi
s co
ncep
t, w
hich
dat
es b
ack
to M
arsh
all (
1890
), is
ver
y ce
n-tr
al in
eco
nom
ic a
naly
sis
beca
use
it en
able
s th
e th
eori
st to
cal
cula
te th
e ou
t-co
me
of a
rat
iona
l dec
isio
n-m
akin
g pr
oces
s. F
or e
xam
ple,
usi
ng th
isas
sum
ptio
n, it
is p
ossi
ble
to d
eriv
e an
upw
ard-
slop
ing
supp
ly c
urve
('th
ehi
gher
the
pric
e th
at c
an b
e ob
tain
ed in
a c
ompe
titiv
e m
arke
t, th
e m
ore
afirm wil supply') as a result of profit-maximization by firms, Without the
assu
mpt
ion
of d
ecre
asin
g m
argi
nal r
etur
ns, t
he s
uppl
y cu
rve
wou
ld n
ot b
eup
war
d-sl
opin
g,H
owev
er, w
hen
mar
gina
l ret
urns
kee
p fa
lling
unt
il th
ey a
re z
ero,
long
-ru
n ec
onom
ic g
row
th is
onl
y po
ssib
le if
som
e 'e
xoge
nous
' fac
tor
is a
ssum
edto
be
pres
ent.
Thi
s co
uld,
for
exa
mpl
e, b
e te
chni
cal c
hang
e th
at f
alls
as
'man
na f
rom
hea
ven'
, or
is g
iven
by
'God
and
the
engi
neer
s', S
uch
exog
e-no
us f
acto
rs, b
y de
fini
tion,
are
not
aff
ecte
d by
eco
nom
ic d
ecis
ions
, and
that
is w
hy e
cono
mic
mod
els
did
not h
ave
very
muc
h to
say
abo
ut g
row
th,
It w
as o
nly
rece
ntly
(e,
g" R
omer
, 198
6, G
ross
man
and
Hel
pman
, 199
1)th
at e
cono
mis
ts w
ere
will
ng to
adm
it th
at w
ith te
chno
logi
cal c
hang
e th
at is
mot
ivat
ed b
y ec
onom
ic g
oals
, the
ass
umpt
ion
of z
ero
mar
gina
l ret
urns
in th
elo
ng r
un w
as im
poss
ible
to m
aint
ain,
Inv
estm
ent i
n te
chno
logy
and
R&
D is
a
492
! . \l¡ '1 ¡, t: 1¡B
art V
ersp
agen
way
to a
void
them
, and
to k
eep
retu
rns
to c
apita
l pos
itive
in th
e lo
ng r
un,
Thi
s op
ened
the
way
for
a w
holly
new
cla
ss o
f so
-cal
led
'end
ogen
ous
grow
th m
odel
s', i
n w
hich
long
-run
gro
wth
can
be
expl
aine
d w
ithou
t res
ort-
ing
to e
xoge
nous
tech
nolo
gica
l cha
nge,
In
thes
e m
odel
s, f
irm
s' d
ecis
ions
on
rese
arch
and
dev
elop
men
t (R
&D
) ar
e ex
plic
itly
mod
eled
as
prof
it-dr
iven
activ
ities
. Pat
ents
are
alw
ays
assu
med
to e
xist
, and
usu
ally
they
are
eve
nas
sum
ed to
hol
d fo
reve
r, T
he la
rge
maj
ority
of
the
'end
ogen
ous
grow
th li
t-er
atur
e', h
owev
er, d
oes
not a
naly
ze th
e in
stitu
tiona
l set
up o
f th
e pa
tent
sys
-te
m (
nota
ble
exce
ptio
ns a
re B
ucci
and
Sag
lam
, 200
0 an
d O
'Don
oghu
e an
dZ
wei
mül
ler,
199
8).
Alth
ough
not
all
of th
e ne
w g
row
th m
odel
s ag
ree
on th
is, s
ome
(e,g
"G
ross
man
and
Hel
pman
, 199
1) a
rgue
that
the
mer
e ex
iste
nce
of R
&D
by
firms is not enough to solve the problem that decreasing marginal returns
pose
for
econ
omic
gro
wth
. The
y ar
gue
that
long
-run
pos
itive
eco
nom
icgr
owth
is o
nly
poss
ible
whe
n te
chno
logi
cal c
hang
e di
spla
ys s
o-ca
lled
'ext
er-
nalit
ies'
or
'spi
love
rs'.
By
this
not
ion,
they
ref
er to
the
idea
that
a te
chno
-lo
gica
l inv
entio
n is
of
use
not o
nly
to it
s in
vent
or, b
ut a
lso
to o
ther
fir
ms
inth
e ec
onom
y, T
he n
atur
e of
tech
nolo
gy, a
s w
il be
arg
ued
in m
ore
deta
il in
the
next
sec
tion,
mak
es it
pos
sibl
e th
at o
ther
fir
ms
than
the
orig
inal
inve
ntor
can
use
(par
ts o
f) it
as
wel
L.G
ross
man
and
Hel
pman
, as
wel
l as
othe
r 'n
ew g
row
th th
eori
sts'
, arg
ueth
at w
ithou
t spi
love
rs, l
ong-
run
econ
omic
gro
wth
wil
ceas
e. T
he in
tuiti
onbe
hind
this
fin
ding
is th
at w
hile
inno
vatio
ns k
eep
occu
rrin
g, th
ere
wil
bem
ore
and
mor
e co
mpe
titio
n an
d th
eref
ore
prof
its f
or e
ach
(new
) in
nova
tion
falL
. Spi
love
rs p
rovi
de a
sou
rce
of f
alln
g R
&D
cos
ts, w
ithou
t whi
ch R
&D
beco
mes
too
expe
nsiv
e re
lativ
e to
the
even
tual
pay
-off
s, A
lthou
gh th
eir
mod
els,
as
wel
l as
this
spe
cific
pro
posi
tion,
rem
ain
to b
e te
sted
em
piric
ally
(e,g
" Jo
nes,
199
5), t
heir
ass
ertio
n cl
earl
y ilu
stra
tes
the
impo
rtan
ce o
f th
esp
ilove
r co
ncep
t for
the
econ
omy.
The
que
stio
n ar
ises
, how
ever
, why
a f
irm
wou
ld in
vest
in R
&D
if o
ther
fir
ms
may
rea
p (p
art o
f) th
e be
nefi
ts o
f th
isin
vest
men
t. O
bvio
usly
, thi
s is
whe
re a
sys
tem
of
inte
llect
ual p
rope
rty
righ
ts(I
PRs)
, mor
e sp
ecif
ical
ly a
pat
ent s
yste
m, c
omes
in,
20.3
Pat
ents
as
Ince
ntiv
es f
or R
&D
20.3
.1 T
he a
ppro
pria
bilty
pro
blem
In a
sen
se, t
echn
olog
ical
kno
wle
dge
is a
n ec
onom
ic g
ood
in w
hich
fir
ms
(and
gov
ernm
ents
) in
vest
mon
ey, C
ompe
titio
n be
twee
n fir
ms
is b
ased
on
493
Eco
nom
ics,
Law
and
Inte
llect
ual P
rope
rty
prod
uct q
ualit
y (i
nclu
ding
ser
vice
) an
d pr
ice,
In
both
of
thes
e as
pect
s of
the
com
petit
ive
proc
ess,
tech
nolo
gy p
lays
an
impo
rtan
t rol
e. T
he p
rice
of
a go
odde
pend
s on
pro
duct
ivity
and
the
cost
s of
inpu
ts s
uch
as la
bour
, raw
mat
eri-
als,
mac
hine
s an
d bu
ildin
gs. B
y en
hanc
ing
prod
uctiv
ity, t
echn
olog
ical
chan
ge m
ay le
ad to
a d
ram
atic
fal
l of
the
pric
e ch
arge
d by
the
firm
that
im-
plem
ents
suc
h pr
oces
s in
nova
tions
, Oth
er f
irm
s in
the
sam
e bu
sine
ss a
re th
enfo
rced
to d
rop
thei
r pr
ices
as
wel
l, or
els
e th
ey w
il be
dri
ven
out o
f th
e m
ar-
ket.
How
this
may
lead
to d
ram
atic
pri
ce f
alls
is il
ustr
ated
wel
l by
an h
is-
tori
cal e
xam
ple
quot
ed in
Fre
eman
and
Soe
te (
1997
, p. 6
0), O
ver
the
peri
od18
70-1
898,
the
pric
e of
ste
el (
in $
per
ton)
fel
l by
83%
, or
an a
vera
ge o
f al
-m
ost 3
% p
er y
ear,
Thi
s tr
emen
dous
dro
p co
inci
ded
with
a p
erio
d in
whi
chim
port
ant i
nnov
atio
ns in
ste
el-m
akin
g (m
ost n
otab
ly th
e B
esse
mer
pro
cess
)w
ere
appl
ied
in th
e A
mer
ican
eco
nom
y,In
vest
men
t in
tech
nolo
gica
l cha
nge
may
als
o be
aim
ed a
t pro
duct
inno
va-
tion.
Moo
re's
law
is p
erha
ps th
e m
ost f
amou
s ex
ampl
e of
rap
id p
rodu
ct in
-no
vatio
n, G
ordo
n M
oore
, the
co-
foun
der
and
chai
rman
of
the
Inte
l cor
pora
-tio
n, p
redi
cted
in th
e 19
60s
that
the
com
plex
ity (
mea
sure
d as
the
num
ber
ofco
mpo
nent
s pu
t on
one
chip
) of
so-
calte
d in
tegr
ated
circ
uits
wou
ld d
oubl
eey
ery
18 m
onth
s. F
or th
e fir
m th
at w
as le
adin
g th
is d
evel
opm
ent (
i,e"
Inte
l),this high rate of product innovation led to a dominant market position,
whi
ch, n
owad
ays,
is c
halle
nged
by
only
a h
andf
ul o
f co
mpe
titor
s.It
wou
ld th
us a
ppea
r fr
om s
uch
anec
dota
l evi
denc
e th
at f
irm
hav
e m
ore
than
eno
ugh
reas
on to
inve
st in
res
earc
h an
d de
velo
pmen
t (R
&D
) in
ord
er to
incr
ease
thei
r co
mpe
titiv
e po
sitio
n, W
hy th
en is
a s
yste
m o
f int
elle
ctua
lpr
oper
ty r
ight
s ne
cess
ary
to s
timul
ate
inve
stm
ent i
n R
&D
? T
he a
nsw
er to
this
pro
blem
lies
in th
e fa
ct th
at te
chno
logy
has
a n
umbe
r of
spe
cial
cha
rac-
teri
stic
s th
at a
re n
ot o
ften
fou
nd in
oth
er e
cono
mic
goo
ds, A
nor
mal
eco
-no
mic
goo
d (s
ay, a
n or
ange
) is
bot
h ri
val a
nd e
xclu
dabl
e. T
his
mea
ns th
aton
ly o
ne p
erso
n ca
n co
nsum
e or
use
the
oran
ge (
riva
lry)
, and
the
supp
lier
ofth
e or
ange
can
exc
lude
per
sons
fro
m c
onsu
min
g it
(i,e
" th
ose
who
are
not
prep
ared
to p
ay f
or th
e or
ange
), T
hese
two
char
acte
rist
ics.
whi
ch h
old
for
the
larg
e m
ajor
ity o
f al
l goo
ds in
mod
em e
cono
mie
s, e
nsur
e th
at th
ese
good
sw
il be
pro
duce
d in
a m
arke
t eco
nom
y. A
far
mer
is w
iling
to g
row
ora
nges
beca
use,
due
to th
e ri
val a
nd e
xclu
dabl
e ch
arac
ter
of th
e or
ange
, she
is a
ble
to s
ell t
he o
rang
es o
n th
e m
arke
t and
ear
a p
rofi
t.T
echn
olog
ical
kno
wle
dge
is a
goo
d fo
r w
hich
the
char
acte
ristic
s of
ri-
valry and excludability do not hold perfectly, Imagine a situation without
inte
llect
ual p
rope
rty
righ
ts. I
f a
firm
wer
e to
inve
st to
dev
elop
a n
ew c
hip,
its
com
petit
ors
wou
ld b
e ab
le to
cop
y th
e kn
owle
dge
embo
died
in th
is c
ircu
it by
494
'''l
Bar
t Ver
spag
en
buyi
ng a
sin
gle
unit
of th
e ne
w p
rodu
ct, a
nd r
ever
se-e
ngin
eer
it. I
n ot
her
wor
ds, t
he k
now
ledg
e em
bodi
ed in
the
chip
is n
on-r
ival
(th
e fa
ct th
at o
nefi
rm u
ses
it do
es n
ot im
ply
that
oth
er f
irm
can
not u
se th
e sa
me
know
ledg
e),
and
is n
on-e
xclu
dabl
e (t
here
is n
o w
ay th
e in
vent
or c
an e
xclu
de o
ther
s fr
omus
ing
the
know
ledg
e sh
e de
velo
ped,
exc
ept f
or th
e tr
ivia
l cas
e th
at th
ekn
owle
dge
is n
ot u
sed
in a
ny w
ay),
The
re w
ould
thus
be
no in
cent
ive
for
a fi
rm to
inve
st in
suc
h kn
owle
dge,
With
out p
rote
ctio
n of
its
inte
llect
ual p
rope
rty,
oth
er f
irm
s ca
n fr
ee-r
ide
onth
e ef
fort
s of
the
inve
ntor
, and
, hen
ce, a
ssum
ing
that
imita
tion
is c
heap
erth
an d
evel
opin
g th
e in
vent
ion,
put
the
new
pro
duct
on
the
mar
ket f
or a
far
low
er p
rice
than
the
orig
inal
inve
ntor
, Thi
s is
why
non
-exc
luda
bilit
y po
se a
prob
lem
in te
rms
of in
cent
ives
to p
rodu
ce th
ese
good
s. N
on-r
ival
ry (
or s
pil-
over
s), h
owev
er, i
mpl
ies
at le
ast a
pot
entia
l eco
nom
ic b
enef
it: f
rom
the
poin
tof
vie
w o
f th
e ec
onom
y as
a w
hole
it is
rat
her
desi
rabl
e th
at s
omet
hing
ispr
oduc
ed b
y on
ly o
ne f
irm
can
be
used
by
man
y,B
esid
es te
chno
logi
cal k
now
ledg
e, th
ere
are
a nu
mbe
r of
oth
er g
oods
that
have
the
char
acte
rist
ics
of n
on-r
ival
ry a
nd n
on-e
xclu
dabi
lty, E
xam
ples
are
natio
nal d
efen
se a
nd c
lean
air
(on
e ca
nnot
exc
lude
indi
vidu
al c
itize
ns f
rom
eith
er o
f th
ose
good
s, a
nd th
ey c
an b
e co
nsum
ed b
y nu
mer
ous
peop
le a
t the
sam
e tim
e), I
n ec
onom
ic th
eory
, the
se g
oods
are
sai
d to
be
char
acte
rize
d by
mar
ket f
ailu
re, i
.e"
a fr
ee m
arke
t eco
nom
y w
il ei
ther
not
pro
duce
thes
ego
ods
at a
ll, o
r pr
oduc
e th
em in
qua
ntiti
es f
ar to
o sm
all f
or th
e ex
istin
g de
-m
and,
Nat
iona
l def
ense
and
cle
an a
ir (
as w
ell a
s øt
her
exam
ples
one
may
thin
k of
) ar
e go
ods
that
are
usu
ally
sup
plie
d by
pub
lic g
over
nmen
ts, T
his
isw
hy th
ese
good
s ar
e ca
lled
publ
ic g
oods
,H
owev
er, p
ublic
pro
visi
on is
not
the
only
way
in w
hich
mar
ket f
ailu
re o
fno
n-ri
val a
nd n
on-e
xclu
dabl
e go
ods
may
be
deal
t with
, The
sys
tem
of
IPR
sca
n be
con
side
red
as a
n in
stitu
tion
that
trie
s to
sol
ve th
e pr
oble
m o
f m
arke
tfa
ilure
by
prov
idin
g pr
ivat
e pr
oduc
ers
with
ince
ntiv
es to
sup
ply
publ
icgo
ods,
As
such
, a s
yste
m o
f IP
Rs
is th
us o
ne o
f th
e po
ssib
le w
ays
to s
olve
the
prob
lem
of
mar
ket f
ailu
res,
The
nex
t sec
tion
wil
prov
ide
an o
verv
iew
of
all o
f th
ese
mec
hani
sms,
and
dis
cuss
the
adva
ntag
es a
nd d
isad
vant
ages
of
IPRs (relative to the other remedies for market failure) in some detaiL.
20.3
.2 W
ays
of s
timul
atin
g in
vent
ion
Dav
id (
1993
) di
scus
ses
the
thre
e P'
s of
tryi
ng to
sol
ve m
arke
t fai
lure
inthe area of technological change: Patronage, Procurement and Property
Rig
hts
(or
Pate
nts)
, All
thre
e m
echa
nism
s ar
e ac
tual
ly u
sed
to s
timul
ate
the
495
Eco
nom
ics,
Law
and
Int
elle
ctua
l Pro
pert
y
deve
lopm
ent o
f ne
w k
now
ledg
e in
pra
ctic
e, a
lthou
gh th
ey a
re r
elat
ed to
dif
-fe
rent
par
ts o
f th
e R
&D
infr
astr
uctu
re. T
he f
irst
P, P
atro
nage
, ref
ers
to th
epr
oces
s w
here
gov
ernm
ent f
inan
ces
a gr
oup
of r
esea
rche
rs to
und
ertk
eR
&D
, and
thus
pro
vide
new
kno
wle
dge,
Thi
s is
the
syst
em th
at is
mos
tw
idel
y us
ed f
or b
asic
sci
ence
, whe
re p
ublic
ly f
inan
ced
univ
ersi
ties
or p
ublic
rese
arch
labs
pla
ya la
rge
role
in p
ushi
ng f
orw
ard
the
fron
tier
of k
now
ledg
e,N
ote
that
this
is s
ißU
lar
to th
e so
lutio
n of
mar
ket f
ailu
re in
the
case
of
stan
-da
rd p
ublic
goo
ds s
uch
as d
efen
se.
Proc
urem
ent r
efer
s to
the
proc
ess
whe
re g
over
nmen
ts e
ngag
e in
con
trac
tsover the development of a specific
piec
e of
kno
wle
dge,
Thu
s, p
ublic
aut
hori-
ties
may
iden
tify
a sp
ecif
ic p
robl
em f
or w
hich
a te
chni
cal s
olut
ion
seem
sfe
asib
le, a
nd th
ey c
ontr
act a
spe
cifi
c gr
oup
of r
esea
rche
rs to
dev
elop
this
solu
tion,
Of
cour
se, o
ften
, the
sam
e re
sear
cher
s w
ho w
ork
in u
nive
rsiti
es o
rgo
vern
men
t lab
s ar
e en
gage
d in
com
petit
ive
bids
for
gove
rnm
ent-
proc
ured
rese
arch
pro
ject
s, s
o th
at th
e tw
o sy
stem
s ov
erla
p in
pra
ctic
e,A
s D
avid
(19
93, p
. 32)
not
es, t
he p
roce
dure
s of
pro
cure
men
t and
pat
ron-
age
suff
er f
rom
the
prob
lem
of
setti
ng th
e pr
ices
rig
ht. H
ow m
uch
shou
ldgo
vern
men
ts in
vest
in r
esea
rch
gran
ts to
uni
vers
ities
, and
how
muc
h sh
ould
they
be
prep
ared
to p
ay f
or a
spe
cifi
c pr
ojec
t und
erta
ken
to s
olve
a p
rede
-fi
ned
tech
nica
l pro
blem
? T
hese
are
que
stio
ns th
at a
re d
iffc
ult,
if n
ot im
pos-
sibl
e, to
ans
wer
. The
third
P, P
rope
rty
right
s, p
rovi
des
at le
ast a
theo
retic
alw
ay o
ut o
f th
is p
robl
em, f
or a
spe
cial
cla
ss o
f te
chno
logi
cal k
now
ledg
e,A
par
t of
know
ledg
e ge
nera
ted
thro
ugh
rese
arch
and
dev
elop
men
t lea
dsto
pos
sibi
litie
s fo
r pr
oduc
ts a
nd p
roce
sses
that
hav
e co
mm
erci
al v
alue
, With
a sy
stem
of
prop
erty
rig
hts,
i,e.
, a (
tem
pora
ry)
lega
l mon
opol
y gr
ante
d to
one
firm
, the
se g
oods
can
be
supp
lied
on th
e fr
ee m
arke
t. T
hus,
a s
yste
m o
fpr
oper
ty r
ight
s le
aves
to th
e m
arke
t to
deci
de w
hat a
'fai
r' pr
ice
for
tech
no-
logi
cal k
now
ledg
e em
bodi
ed in
a p
rodu
ct o
r pr
oces
s is
, The
ince
ntiv
e pr
ob-
lem
is s
olve
d by
lega
lly e
xclu
ding
oth
ers
than
the
inve
ntor
(or
pat
ent h
olde
r)fr
om u
sing
the
tech
nica
l inf
orm
atio
n, T
hus
the
pate
nt h
olde
r is
ena
bled
tom
ake
a pr
ofit
on h
er r
esea
rch,
Obv
ious
ly, t
here
are
als
o ce
rtai
n di
sadv
anta
ges
to g
rant
ing
a m
onop
oly,
With
'nor
mal
' eco
noßU
c go
ods
(i,e
., ri
val a
nd e
xclu
dabl
e go
ods)
, eco
noßU
cth
eory
cle
arly
sho
ws
that
a m
arke
t with
man
y su
pplie
rs a
nd m
any
buye
rspr
oduc
es m
ore
wel
fare
than
a m
arke
t in
whi
ch o
nly
one
(mon
opol
y) o
r a
few
(olig
opol
y) s
uppl
iers
are
act
ive.
Put
in s
impl
e te
rm, m
onop
oly
firm
s ch
arge
too
high
pri
ces
from
a s
ocie
tal p
oint
of
view
, Thi
s is
why
pub
lic g
over
n-m
ents
ofte
n pu
rsue
an
activ
e an
ti-tr
ust a
nd p
ro-c
ompe
titio
n po
licy,
The
trad
e-of
f be
twee
n th
e ad
vant
ages
of
a m
onop
oly
prov
ided
by
pate
nts
and
the
496
, !1B
art V
ersp
agen
disa
dvan
tage
s is
oft
en d
iscu
ssed
as
the
trad
e-of
f be
twee
n st
atic
eff
icie
ncy
(stim
ulat
ing
com
petit
ion)
and
dyn
aßU
c ef
ficie
ncy
(stim
ulat
ing
inve
ntio
nth
roug
h pa
tent
s) (
see,
e,g
" K
aßU
en a
nd S
chw
arz,
198
2). T
he tr
ade-
off
also
plays an important
role
in th
e te
nsio
n be
twee
n go
vern
men
t pol
icie
s ai
med
at
scie
nce
and
tech
nolo
gy a
nd a
nti-
trus
t pol
icy.
In
the
cont
ext o
f E
urop
ean
in-
tegr
atio
n, f
or e
xam
ple,
str
ict r
ules
hav
e be
en s
et to
tech
nolo
gy p
olic
y in
or-
der
to e
nsur
e th
at it
doe
s no
t int
erve
ne w
ith c
ompe
titio
n po
licy?
Bes
ides
the
prob
lem
of
mon
opol
ies
char
ging
too
high
a p
rice
, the
re a
real
so a
num
ber
of o
ther
dis
adva
ntag
es to
the
pate
nt s
yste
m, D
avid
(19
93)
dis-
cuss
es th
e so
-cal
lèd
'com
mon
-poo
l' pr
oble
m, T
his
refe
rs to
the
notio
n th
atfi
rm o
ften
com
pete
for
the
sam
e in
vent
ion,
whi
ch le
ads
to s
o-ca
lled
pate
ntra
ces,
in w
hich
the
win
ner
typi
cally
take
s al
l (se
e, e
,g.,
Das
gupt
a an
dSt
iglit
z, 1
980)
, The
com
mon
poo
l pro
blem
pre
sent
s tw
o pr
oble
ms
from
the
poin
t of
view
of
soci
al b
enef
its a
nd c
osts
, Acc
ordi
ng to
Dav
id (
1993
), f
irst
,"i
t is
likel
y th
at f
rom
the
view
poin
t of
soci
ety
ther
e w
il be
too
man
y co
n-te
stan
ts in
the
race
s fo
r pr
iori
ty in
dis
cove
ry a
nd in
vent
ion,
Tho
se e
nter
ing
cons
ider
onl
y w
hat t
hey
indi
vidu
ally
sta
nd to
gai
n, a
nd th
ey d
o no
t tak
e in
toac
coun
t the
eff
ect o
f th
eir
part
icip
atio
n on
the
expe
cted
out
com
es o
f al
l the
othe
r co
mpe
titor
s" (
p, 3
3), T
hese
eff
ects
on
the
outc
omes
of
othe
r co
ntes
t-an
ts a
re o
bvio
usly
neg
ativ
e, fo
r th
e m
ore
com
petit
ors
ther
e ar
e, th
e sm
alle
rth
e pr
obab
ility
for
eac
h of
them
to b
e fi
rst.
In o
ther
wor
ds, w
hen
pote
ntia
lin
vent
ors
fish
in a
com
mon
poo
l of
know
ledg
e, r
esou
rces
wil
be s
pent
in a
was
tefu
l way
(fr
om th
e po
int o
f vi
ew o
f th
e to
tal e
cono
my)
, Sec
ond,
aga
inci
ting
Dav
id (
1993
), "
ther
e is
a te
nden
cy f
or p
riva
te r
ents
to b
e di
ssip
ated
inth
e sc
ram
ble
for
the
priz
e of
pri
ority
and
all
that
it w
ould
bri
ng, T
he p
riva
tevalue of arriving at a new finding
a lit
tle s
oone
r th
an th
e se
cond
-pla
ce c
on-
test
ant i
s lik
ely
to e
xcee
d gr
eatly
the
bene
fit t
hat s
ocie
ty w
ould
der
ive
from
the
slig
ht a
dvan
tage
in th
e da
te o
f di
scov
ery"
(p,
33)
,T
hus,
alth
ough
pat
ents
do
not o
nly
enta
il po
sitiv
e ef
fect
s on
wel
fare
,m
ost e
cono
ßUc
trea
tmen
ts o
f th
e su
bjec
t wou
ld c
oncl
ude
that
ove
rall,
the
bene
fits
of
a pa
tent
sys
tem
are
pos
itive
(e,
g" v
an D
ijk, 1
994,
Sch
erer
and
Ros
s, 1
990)
, For
exa
mpl
e, M
azzo
leni
and
Nel
son
(199
8, p
, 281
) co
nclu
de:
"In
som
e ar
eas,
pat
ent r
ight
s ce
rtai
nly
are
econ
oßU
cally
and
soc
ially
,pro
duc-
tive
in g
ener
atin
g in
vent
ion,
spr
eadi
ng te
chno
logi
cal k
now
ledg
e, in
duci
ngin
nova
tion
and
com
mer
cial
izat
ion,
and
pro
vidi
ng s
ome
degr
ee o
f ord
er in
the
deve
lopm
ent o
f br
oad
tech
nolo
gica
l pro
spec
ts, H
owev
er, i
n m
any
area
sof
tech
nolo
gy th
is is
not
the
case
". T
his
conc
lusi
on le
aves
, how
ever
, at l
east
2 B
usin
ess
rese
arch
spo
nsor
ed b
y th
e E
urop
ean
Com
mss
ion
is li
mite
d to
the
so-c
alle
d pr
e-
competitive phase,
497
Eco
nom
ics,
Law
and
Int
elle
ctua
l Pro
pert
y
two
issu
es to
be
reso
lved
, Fir
st, w
heth
er p
aten
ts (
or I
PRs
in g
ener
al)
are
eff-
cien
t mea
ns o
f re
achi
ng th
eir
goal
(st
imul
atin
g in
vent
ion
and
com
mer
cial
iza-
tion
ther
eof)
, and
sec
ond,
whe
ther
any
thin
g ca
n be
sai
d ab
out t
he d
esig
n of
pate
nts,
With
reg
ard
to th
e fi
rst q
uest
ion,
it h
as b
een
argu
ed th
at f
irm
s ha
ve a
lter-
nativ
e op
tions
for
app
ropr
iatin
g th
e re
turn
to R
&D
inve
stm
ent,
and
that
thes
eal
tern
ativ
e op
tions
are
oft
en u
sed
mor
e th
an p
aten
ts, L
evin
, Kle
vori
ck e
t al.
(198
7), i
n a
surv
ey a
mon
g la
rge
firm
s in
the
U.S
" an
d A
rnde
l and
Van
de
Paal
(19
95)
for
Eur
opea
n la
rge
firm
s, f
ound
that
sec
recy
, est
ablis
hing
a le
ad-
time,
an
effe
ctiv
e m
arke
ting
cam
paig
n, a
nd le
arin
g ef
fect
s w
ere
mea
sure
sof
pro
tect
ing
know
ledg
e th
at w
ere
cons
ider
ed to
be
mor
e ef
fect
ive
than
pat
-en
ts b
y m
any
(alth
ough
not
all)
fir
ms.
SiI
llar
conc
lusi
ons
had
been
rea
ched
in e
arlie
r st
udie
s su
ch a
s T
aylo
r an
d S
ilber
ston
(19
73),
Maz
zole
ni a
nd N
el-
son (1998) argue that the above-mentioned studies which arve at the con-
clus
ion
that
pat
entin
g is
oft
en o
nly
a Il
nor
tool
in a
ppro
pria
ting
know
ledg
ear
e bi
ased
tow
ards
larg
e fi
rms,
Man
y of
the
way
s in
whi
ch th
ese
larg
e fi
rms
appr
opria
te k
now
ledg
e ar
e cl
osel
y re
late
d to
thei
r si
ze (
mar
ketin
g bu
dget
,learing effects), and hence small firms may have to rely more on patents,
Impo
rtan
t dif
fere
nces
in th
is r
espe
ct e
xist
bet
wee
n in
dust
ries
, or
the
know
ledg
e ba
ses
unde
rlyi
ng a
nd th
e in
stitu
tions
sur
roun
ding
them
. For
ex-
ampl
e, in
the
phar
mac
eutic
als
sect
or, d
ue in
par
t to
the
fact
that
cop
ying
of
cheI
lcal
sub
stan
ces
is v
ery
prec
ise
and
rath
er c
heap
, and
giv
en th
at a
utho
ri-
ties
requ
est d
etai
led
info
rmat
ion
abou
t the
con
tent
s of
med
icin
es, p
aten
t pro
-te
ctio
n is
con
side
red
to b
e ve
ry im
port
ant.
In th
e el
ectr
onic
s se
ctor
, sho
rtpr
oduc
t lif
e cy
cles
oft
en m
ake
pate
nts
rela
tivel
y in
effc
ient
, alth
ough
mos
t of
the larger electronic firms hold large patent portfolios, Thus, the so-called
'pro
pens
ity to
pat
ent i
nnov
atio
ns' d
iffe
rs c
onsi
dera
bly
betw
een
diff
eren
t in-
dust
ries
,W
ith r
egar
d to
the
issu
e of
the
desi
gn o
f th
e pa
tent
sys
tem
, eco
noIl
can
alys
is h
as m
ainl
y an
alyz
ed th
e qu
estio
n ho
w a
n 'o
ptim
al' p
aten
t sho
uld
bede
sign
ed, A
n op
timal
pat
ent i
s on
e th
at m
axiI
lzes
the
wel
fare
of
the
inve
n-tio
n it
conc
erns
, or,
in o
ther
wor
ds, o
ne th
at s
trik
es th
e be
st b
alan
ce b
etw
een
the
posi
tive
and
nega
tive
effe
cts
of p
aten
ts a
s ou
tline
d ab
ove.
In
this
res
pect
,the issues of patent length (duration of the monopoly right) and patent
brea
dth
(sco
pe o
f pr
otec
tion)
hav
e be
en w
idel
y an
alyz
ed,3
Incr
easi
ng th
e le
ngth
of
a pa
tent
obv
ious
ly in
crea
ses
the
amou
nt o
f pr
of-
its th
e in
vent
or m
ay d
raw
fro
m h
er in
vent
ion,
but
it a
lso
incr
ease
s th
e w
el-
fare
loss
es d
ue to
mon
opol
y po
wer
. Nor
dhau
s (1
969)
was
the
firs
t to
addr
ess
3 Van Dijk (1994) also uses the concept of
heig
ht, w
hich
ref
ers
to th
e no
velty
req
uire
men
ts,
498
.~
Bar
t Ver
spag
en
the
issu
e of
pat
ent l
engt
h in
a f
orm
al s
ettin
g. I
n hi
s an
alys
is, t
he o
ptim
al p
at-
ent l
engt
h de
pend
s on
the
pric
e el
astic
ity o
f de
man
d, a
nd th
e el
astic
ity o
f th
eex
tent
of
tech
nica
l im
prov
emen
ts w
ith r
egar
d to
R&
D e
xpen
ditu
res.
With
high
er p
rice
ela
stic
ity o
f de
man
d fo
r th
e ne
w p
rodu
ct, t
he o
ptim
al p
aten
tle
ngth
is s
hort
er, b
ecau
se th
e hi
gh m
onop
oly
pric
e im
plie
s a
larg
e w
elfa
relo
ss, I
f la
rger
pro
duct
ivity
incr
ease
s ar
e ac
hiev
ed w
ith a
giv
en le
vel o
f R
&D
,th
e op
timal
leng
th o
f th
e pa
tent
wil
also
be
shor
ter,
bec
ause
R&
D is
che
ap,
and
henc
e th
e in
cent
ive
does
not
nee
d to
be
very
larg
e,Fo
llow
ing
Kle
mpe
rer
(199
0), t
he f
orm
al li
tera
ture
mos
tly c
onsi
ders
the
issue of patent breadth in a context of so-called horizontal product differen-
tiatio
n,4
In th
is a
ppro
ach,
tech
nolo
gica
l inn
ovat
ion
is s
een
as a
pro
cess
that
prod
uces
mor
e va
rian
ts o
f a
cons
umpt
ion
good
, Bec
ause
con
sum
er ta
stes
diff
er, e
ach
new
var
iant
cre
ates
its
own
dem
and,
with
out f
ully
cap
turi
ng th
em
arke
t.5 A
bro
ad p
aten
t the
n ca
ptur
es a
larg
e pa
rt o
f th
e ho
rizo
ntal
ly d
iffe
r-en
tiate
d pr
oduc
t spa
ce. A
s in
the
case
of
pate
nt le
ngth
, the
opt
imal
bre
adth
depe
nds
on a
num
ber
of m
odel
par
amet
ers,
suc
h as
var
ious
ela
stic
ities
. Van
Dijk
's (
1994
, p, 1
13)
conc
lusi
on th
at "
the
exac
t con
ditio
ns f
or c
hoos
ing
aniIltation or improvement strategy are not particularly important because
they
dep
end
on s
peci
fic
mod
elin
g as
sum
ptio
ns"
in a
str
ict s
ense
ref
ers
only
to h
is o
wn
mod
el o
f pa
tent
hei
ght a
nd b
read
th, b
ut s
trik
es m
e as
rea
sona
bly
valid
for
the
fiel
d as
a w
hole
,
20.4
Pat
ents
and
Tec
hnol
ogy
Spilo
vers
The
tech
nolo
gica
l kno
wle
dge
that
is d
escr
ibed
in a
pat
ent a
pplic
atio
n is
usef
ul n
ot o
nly
to th
e pa
tent
app
lican
t but
als
o to
oth
er in
vent
ors
in th
e sa
me
fiel
d, A
lthou
gh th
ese
othe
r in
vent
ors
are
not a
llow
ed to
use
the
pate
nted
know
ledg
e in
a p
rodu
ct o
r pr
oces
s th
at w
il be
use
d fo
r ec
onoI
lc p
urpo
ses,
the
know
ledg
e in
a p
aten
t may
stil
be
usef
ul to
them
in d
iffe
rent
way
s, F
orex
ampl
e, th
is k
now
ledg
e m
ay g
ive
them
new
idea
s fo
r in
vent
ions
, Als
o, th
ekn
owle
dge
desc
ribe
d in
a p
aten
t oft
en in
crea
ses
the
gene
ral s
tock
of
know
l-ed
ge in
a f
ield
, suc
h as
wou
ld, f
or e
xam
ple,
be
the
case
if a
pat
ent d
escr
ibes
4 W
ith h
oriz
onta
l pro
duct
diff
eren
tiatio
n, p
rodu
cts
are
diffe
rent
iate
d in
to v
aran
ts th
at c
anno
t
be r
anke
d in
term
of
som
e ob
ject
ive
qual
ity m
easu
re, b
ut a
re n
onet
hele
ss d
istin
ct (
for
exam
-pl
e, th
e co
mm
odity
fru
its is
hor
izon
tally
dif
fere
ntia
ted
into
app
les,
ora
nges
, etc
,). W
ith v
erti-
cal p
rodu
ct d
iffer
entia
tion,
pro
duct
var
ants
can
be
rank
ed a
ccor
ding
to q
ualit
y, e
,g"
Fre
nch
win
e ha
s a
high
er q
ualit
y th
an N
orw
egia
n w
ine.
In
the
latte
r ca
se, c
onsu
mer
s w
il ch
oose
on
the
basi
s of
qua
lity-
pric
e ra
tios,
5 In
term
s of
the
exam
ple
in th
e pr
evio
us f
ootn
ote,
som
e pe
ople
wil
alw
ays
pref
er o
rang
es to
new
(e.
g., g
enet
ical
ly e
ngin
eere
d) v
aria
nts
offr
uit,
499
Eco
nom
ics,
Law
and
Int
elle
ctua
l Pro
pert
y
that
som
e te
chni
cal p
roce
dure
is p
ossi
ble
to c
arry
out
. Als
o, s
ome
pate
nt s
ys-
tem
s, s
uch
as th
e E
urop
ean
one,
req
uire
the
pate
nt a
pplic
ant t
o re
veal
so-
calle
d no
n-cl
aim
able
kno
wle
dge
if th
is is
rel
evan
t to
the
devi
ce o
r pr
oced
ure
desc
ribe
d in
the
pate
nt,
Thu
s, e
ven
if a
pat
ent p
recl
udes
pur
e ill
tatio
n of
an
inve
ntio
n, it
doe
sno
t rul
e ou
t all
exte
rnal
ities
rel
ated
to it
. The
pat
ent p
rovi
des
the
inve
ntor
with
a m
onop
oly
that
ena
bles
her
to g
ener
ate
prof
its a
nd h
ence
pro
vide
s an
ince
ntiv
e fo
r th
e re
sear
ch e
ffor
t, bu
t it l
eave
s ce
rtai
n as
pect
s of
the
tech
no-
logi
cal k
now
ledg
e to
be
expl
oite
d by
oth
ers
than
the
orig
inal
inve
ntor
. How
muc
h is
left
to o
ther
s to
exp
lore
, and
, thu
s, h
ow m
uch
can
be a
ppro
pria
ted
byth
e in
vent
or, d
epen
ds o
n th
e br
eadt
h of
the
pate
nt.
The
fac
t tha
t pat
ents
, at l
east
pat
ents
that
are
not
too
broa
d, le
ave
open
exte
rnal
ities
is a
n im
port
ant d
istin
ctio
n w
ith o
ther
type
s of
IPR
s. F
or e
xam
-pl
e, tr
adem
arks
and
, per
haps
to a
less
er e
xten
t, co
pyri
ghts
do
not i
nduc
e an
yex
tern
aliti
es, o
r at
leas
t not
to th
e sa
me
exte
nt a
s pa
tent
s do
. Whe
n ,a
fir
mta
kes
out a
trad
emar
k, it
bas
ical
ly s
eeks
pro
tect
ion
for
its m
arke
ting
activ
i-,tie
s, O
bvio
usly
, mar
ketin
g do
es n
ot c
arry
the
sam
e am
ount
of
spilo
vers
as
rese
arch
and
dev
elop
men
t, al
thou
gh, i
n so
me
case
s, it
llgh
t be
just
as
effe
c-tiv
e a
mea
ns o
f st
rate
gic
adva
ntag
e fo
r a
firm
, Giv
en th
e ec
onol
lC im
por-
tanc
e of
spi
love
rs (
or e
xter
nalit
ies)
that
was
und
erlin
ed a
bove
, thi
s cl
earl
yes
tabl
ishe
s th
e sp
ecia
l im
port
ance
of p
aten
ts a
s co
mpa
red
to c
erta
in o
ther
type
s of
IPR
s.6
One
cou
ld s
ay th
at a
pat
entin
g sy
stem
has
an
impo
rtan
t bea
r-ing on the dynallc efficiency (growth potential) of an economy, while this
is le
ss o
bvio
us f
or o
ther
type
s of
IPR
s,T
his
also
impl
ies
that
the
brea
dth
of p
aten
ts h
as im
port
ant c
onse
quen
ces
for
the
grow
th p
oten
tial o
f th
e ec
onom
y, U
sual
ly, h
owev
er, t
he m
odel
s of
optim
al p
aten
t des
ign,
whi
ch w
ere
disc
usse
d br
iefl
y in
the
prev
ious
sec
tion,
do n
ot c
onsi
der
thes
e dy
nallc
eff
ects
, The
y ar
e lil
lted
to th
e st
atic
wel
fare
effe
cts
of p
aten
ts, i
.e"
they
com
pare
the
wel
fare
cos
ts a
nd b
enef
its o
f a
pat-
ent w
ithou
t tak
ing
into
acc
ount
the
effe
ct a
pat
ent m
ay h
ave
on f
utur
e in
no-
vation (through spilovers), Important exceptions to this are Scotchmer
(199
1) a
nd S
cotc
hmer
and
Gre
en (
1990
), a
s w
ell a
s th
e le
ss fo
rmal
, qua
lita-
tive
liter
atur
e on
pat
ent b
read
th, T
he la
tter
bran
ch o
f lit
erat
ure
star
ed w
ith
6 T
rade
mar
ks, f
or e
xam
ple,
are
mai
nly
used
for
adv
ertis
ing,
and
tlus
doe
s no
t obv
ious
ly g
en-
erat
e ex
tern
aliti
es, C
opyr
ight
s on
, for
exa
mpl
e, c
ompu
ter
code
do
not i
mpl
y di
sclo
sure
of
the
unde
rlyi
ng 'b
liiep
rint
s' (
sour
ce c
ode)
and
hen
ce a
lso
gene
rate
lim
ited
exte
rnal
ities
, Cle
arly
,th
is d
oes
not m
ean
that
cop
yrig
hts
or tr
adem
arks
are
not
impo
rtan
t for
the
econ
omy,
The
re a
rego
od e
cono
mic
, leg
al a
nd o
ther
rea
sons
for
the
exis
tenc
e of
thes
e fo
rms
of I
PRs,
500
'1'
. .."
¡ ;
Bar
t Ver
spag
en
earl
y co
ntri
butio
ns b
y K
itch
(197
7) a
nd B
eck
(198
1), w
hile
Maz
zole
ni a
ndN
elso
n (1
998)
is a
rec
ent c
ontr
ibut
ion,
Tak
ing
into
acc
ount
the
spilo
ver
effe
ct o
f pa
tent
s on
the
prod
uctiv
ity o
ffuture research, one is faced with a fallliar trade-off, On the one. hand,
broa
der
pate
nts
redu
ce s
pilo
vers
to o
ther
fin
ns th
an th
e in
vent
or, A
lthou
ghin
pri
ncip
le th
ese
spilo
vers
cou
ld b
e 'in
tern
aliz
ed' b
y th
e pa
tent
hol
der,
i,e"
the
bene
fici
al e
ffec
ts o
n fu
ture
inve
ntio
n co
uld
be c
aptu
red
by th
e pa
tent
hold
er, t
his
inte
rnal
izat
ion
is u
nlik
ely
to b
e co
mpl
ete,
For
exa
mpl
e, in
the
case
of
a 'g
ener
al-p
urpo
se te
chno
logy
', th
e sc
ope
of th
e fi
rm th
at h
olds
the
pate
nt is
unl
ikel
y to
cov
er th
e co
mpl
ete
spec
trum
of
poss
ible
app
licat
ions
of
the
spilo
vers
, and
/or
tran
sact
ion
cost
s fo
r lic
ensi
ng m
ay b
e to
o hi
gh to
allo
wefficient spread of the spil
over
s to
oth
er f
irm
. Thu
s, b
road
pat
ents
are
bad
for
spilo
vers
, and
, hen
ce, b
ad f
or d
ynal
lc p
erfo
rman
ce o
f th
e ec
onom
y.O
n th
e ot
her
hand
, bro
ader
pat
ents
incr
ease
the
(pot
entia
l) p
ay-o
ff to
the
pate
nt h
olde
r, a
nd h
ence
the
ince
ntiv
e fo
r in
vent
ion
is in
crea
sed,
By
incr
eas-
ing
the
num
ber
of in
vent
ions
, obv
ious
ly, a
lso
the
amou
nt o
f sp
ilove
rs is
in-
crea
sed.
Whe
ther
bro
ader
pat
ents
incr
ease
or
decr
ease
the
amou
nt o
f kn
owl-
edge
ava
ilabl
e fo
r sp
ilove
rs th
us d
epen
ds o
n th
e va
riou
s el
astic
ities
invo
lved
in th
is p
roce
ss, -
How
this
trad
e-of
f tu
rns
out,
and
henc
e w
heth
er o
r no
t bro
ad p
aten
ts a
rego
od f
or d
ynal
lc p
erfo
rman
ce o
f th
e ec
onom
y, is
har
d to
judg
e in
a p
urel
yth
eore
tical
app
roac
h, W
ithou
t an
idea
of
the
empi
rica
l fac
ts, i
t is
likel
y th
atsu
ch th
eory
run
s in
to th
e sa
me
prob
lem
s as
wer
e si
gnal
ed a
bove
for
the
'sta
tic' m
odel
s of
pat
ent b
read
th. T
he o
utco
me
depe
nds
on m
odel
par
ame-
ters
, and
the
mod
els
are
too
abst
ract
to m
ake
empi
rica
l est
imat
ion
of th
e pa
-ra
met
ers
poss
ible
, Thu
s, c
ase
stud
ies
of s
peci
fic
sect
ors,
tech
nolo
gies
and
coun
trie
s ar
e ve
ry u
sefu
l with
reg
ard
to th
e qu
estio
n of
pat
ent b
read
th,
For
exam
ple,
rec
ent p
ract
ical
dis
cuss
ions
in th
e fi
eld
of I
PRs
focu
s on
the
scop
e of
pro
teçt
ion
that
sho
uld
be o
ffer
ed o
n in
vent
ions
in f
ield
s su
ch a
sco
mpu
ter
soft
war
e, in
tegr
ated
cir
cuit
desi
gns,
and
bio
tech
nolo
gy (
life)
(se
e,e,
g" C
hapt
ers
11-1
5 in
Wal
lers
tein
, Mog
ee e
t at.,
199
3, a
s w
ell a
s V
an W
ijkan
d Ju
nne,
199
3), T
he g
ener
al te
nden
cy o
f th
e di
scus
sion
has
bee
n to
off
erm
ore
exte
nsiv
e pr
otec
tion
for
thes
e te
chno
logi
cal f
ield
s th
an w
as p
ossi
ble
onth
e ba
sis
of th
e le
gal a
rang
emen
ts s
ome
year
s ag
o (w
hen
thes
e te
chno
logi
esw
ere
just
cO
llng
into
exi
sten
ce),
Maz
zole
ni a
nd N
elso
n (1
998)
war
n ag
ains
t suc
h a
tren
d of
bro
aden
ing
pate
nt p
rote
ctio
n, T
hey
argu
e th
at w
hen
tech
nolo
gica
l cha
nge
proc
eeds
in"c
umul
ativ
e sy
stem
s" (
p, 2
81),
bro
ad p
aten
ts a
re p
oten
tially
ham
peri
ng to
the
rate
of
inve
ntio
n, T
he d
ange
r th
ey s
ee is
that
an
earl
y, b
road
pat
ent i
n
501
Eco
nom
ics,
Law
and
Int
elle
ctua
l Pro
pert
y
such
a f
ield
lock
s ou
t fir
ms
who
do
not h
ave
acce
ss to
this
pat
ent,
espe
cial
lyif
tran
sact
ion
cost
s fo
r lic
ensi
ng a
re h
igh,
In
othe
r w
ords
, alth
ough
they
do
not u
se th
e te
rm 's
pilo
vers
' or
'ext
erna
litie
s', t
hey
mak
e ex
actly
the
sam
ear
gum
ent a
gain
st b
road
pat
ents
as
has
been
mad
e ab
ove
usin
g th
e id
ea o
fsp
ilove
rs, M
erge
s an
d N
elso
n (1
990)
dis
cuss
a n
umbe
r of
spe
cifi
c ex
ampl
esfr
om th
e (r
ecen
t) h
isto
ry o
f te
chno
logy
to s
uppo
rt th
e ca
se th
at b
road
pat
ents
hind
er s
pilo
vers
, due
to, a
mon
g ot
her
thin
gs, h
igh
tran
sact
ion
cost
s fo
r li-
cens
ing,
I te
nd to
sup
port
the
Maz
zole
ni a
nd N
elso
n co
nclu
sion
that
bro
ad p
aten
tsar
e po
tent
ially
dan
gero
us, T
here
is n
o ne
ed to
use
the
pate
nt s
yste
m to
aim
toin
tern
aliz
e al
l the
spi
love
rs o
f in
vent
ion
to a
sin
gle
firm
(i.e
" th
e in
vent
or),
Thi
s w
ould
ess
entia
lly c
ome
dow
n to
elim
inat
ing
a la
rge
par
of th
e po
tent
ial
bene
fits
to th
e ec
onom
y at
larg
e, b
ecau
se n
o si
ngle
fir
m is
larg
e en
ough
tofully exhaust the possibilties of important inventions in key technology
fiel
ds, T
he a
im o
f a
pate
nt s
houl
d be
to p
rovi
de a
fir
m w
ith th
e po
ssib
ilty
tom
ake
a fa
ir p
rofi
t in
orde
r to
ear
bac
k its
R&
D c
osts
, It i
s th
eref
ore
per-
fect
ly s
ound
to le
ave
a la
rge
part
of
the
spilo
vers
to o
utsi
ders
, and
ther
eby
incr
ease
the
over
all b
enef
its to
the
econ
omy,
As
wa~
arg
ued
in S
ectio
n 2,
this
is th
e ba
sic
idea
beh
ind
mod
em g
row
th th
eory
, a p
art o
f w
hich
arg
ues
that
with
out s
uch
spilo
vers
, lon
g-ru
n gr
owth
wou
ld c
onve
rge
to z
ero.
In m
any
resp
ects
, the
stu
dies
by
Maz
zole
ni a
nd N
elso
n (1
998)
and
Mer
ges
and
Nel
son
(199
0) r
each
con
clus
ions
opp
osite
to th
ose
in th
e ea
rlyco
ntri
butio
ns b
y K
itch
(197
7) a
nd B
eck
(198
1), T
hese
aut
hors
wer
e ar
guin
gin
fav
our
of b
road
pat
ents
, ess
entia
lly to
rul
e ou
t ine
ffci
enci
es in
the
coor
di-
natio
n be
twee
n m
any
cont
esta
nts
in a
pat
ent r
ace
follo
win
g an
ear
ly b
asic
pate
nt in
a f
ield
, The
y re
com
men
d th
at s
uch
an e
arly
bas
ic p
aten
t sho
uld
bebr
oad,
so
that
the
firm
that
hol
ds it
may
eith
er e
xplo
re th
e fi
eld
on it
s ow
n, o
rlic
ense
the
pate
nt to
the
othe
r fir
ms
that
are
mos
t pro
mis
ing
with
reg
ard
tosu
cces
s in
R&
D, I
t is
thus
see
n th
at n
o st
rong
con
clus
ion
has
yet b
een
reached in this literature, Some recommendations
for
futu
re r
esea
rch
wil
bem
ade
belo
w,
The
Wor
ld B
ank
(199
8), f
inal
ly, a
lthou
gh it
arg
ues
in g
ener
al te
rms
for
incr
easi
ng th
e br
eadt
h of
pat
ents
on
a w
orld
wid
e sc
ale
(the
so-
calle
d T
RIP
sag
reem
ent,
see
belo
w),
war
ns a
gain
st to
o br
oad
prot
ectio
n in
the
spec
ific
fiel
d of
gen
e sp
licin
g, o
n th
e ac
coun
t tha
t thi
s is
a te
chno
logy
with
suc
h a
broa
d ra
nge
of a
pplic
atio
ns th
at p
aten
ts r
un th
e ri
sk o
f lo
ckin
g ou
t too
man
ysp
il ov
ers
,
502
Bart Verspagen
20.5
Pat
ents
and
Tec
hnol
ogy
Tra
nsfe
r: a
Sho
rt R
evie
wof
the
Deb
ate
Inte
llect
ual P
rope
rty
Rig
hts
(IPR
s) a
re a
n im
port
ant f
acto
r in
the
deba
teon
the
role
of i
nstit
utio
ns in
tech
nolo
gy tr
ansf
er (
Yan
key,
198
7, V
an W
ijkan
d Iu
nne,
199
3), A
s w
as a
lrea
dy s
een
abov
e, p
aten
ts a
re th
e fo
rm o
f in
tel-
lect
ual p
rope
rty
righ
ts m
ost c
lose
ly a
ssoc
iate
d w
ith te
chno
logi
cal i
nven
tions
,B
y te
chno
logy
tran
sfer
, thi
s pa
per
wil
refe
r to
the
proc
ess
in w
hich
tech
no-
logi
cal k
now
ledg
e de
velo
ped
and
(fir
st)
appl
ied
in th
e de
velo
ped
coun
trie
s(s
ay, O
EC
D c
ount
ries
) is
tran
sfer
red
to c
ount
ries
with
low
er le
vels
of
tech
-no
logi
cal k
now
ledg
e (a
s em
bodi
ed in
thei
r pr
oduc
tive
proc
ess)
, It h
as to
be
reco
gniz
ed th
at th
e la
tter
set o
f co
untr
ies
is in
fac
t a v
ery
hete
roge
neou
sgr
oup,
incl
udin
g, f
or e
xam
ple,
the
so-c
alle
d N
ewly
Ind
ustr
ializ
ed C
ount
ries
(NIC
s), a
s w
ell a
s co
untr
ies
with
pre
-ind
ustr
ial a
gric
ultu
ral e
cono
mie
s.T
he tw
ofol
d ai
m o
f th
e pa
tent
sys
tem
- f
irst
, to
prot
ect a
n in
vent
or f
rom
imita
tion
and
henc
e to
incr
ease
the
ince
ntiv
e fo
r in
vent
ive
activ
ity, a
nd, s
ec-
ond,
to s
timul
ate
the
diss
emin
atio
n of
tech
nica
l inf
orm
atio
n, s
o th
at it
can
be
used
in f
urth
er in
vent
ive
activ
ity, t
here
by in
crea
sing
the
syst
em-w
ide
rate
of
inve
ntio
n -
is a
gain
rel
evan
t for
the
deba
te h
ere,
Obv
ious
ly, t
he s
econ
d ai
m(d
iffu
sion
) is
clo
sely
ass
ocia
ted
with
tech
nolo
gy tr
ansf
er, s
omet
hing
that
isac
tivel
y pu
rsue
d by
bot
h na
tiona
l gov
ernm
ents
and
inte
rnat
iona
l org
aniz
a-tions. However, just as in the general case for a patent system discussed
abov
e, th
ere
mig
ht b
e so
me
tens
ion
betw
een
appr
opri
atio
n (f
irst
aim
of
the
pate
nt s
yste
m)
and
tech
nolo
gy tr
ansf
er. B
road
ly s
peak
ing,
the
liter
atur
e di
s-ce
rns
four
dif
fere
nt w
ays
in w
hich
pat
ents
hav
e an
impa
ct o
n de
velo
pmen
tan
d/or
tech
nolo
gy tr
ansf
er (
e,g"
Yan
key,
198
7, V
an W
ijk a
nd Iu
nne,
199
3):
1. S
tron
g(er
) pa
tent
pro
tect
ion
in d
evel
opin
g na
tions
may
incr
ease
the
inve
ntiv
e ef
fort
s in
the
deve
lopi
ng c
ount
ries
them
selv
es, a
ndth
ereb
y in
crea
se th
e ra
te o
f gr
owth
in th
ese
coun
trie
s,
2, P
aten
ts a
llow
for
(inte
rnat
iona
l) lic
ensi
ng, s
o th
at fi
rms
in d
evel
-op
ing
coun
trie
s m
ay b
uy te
chno
logy
from
firm
s in
(te
chno
logi
-ca
lly)
mor
e ad
vanc
ed n
atio
ns (
tech
nolo
gy tr
ansf
er),
3, S
tron
g(er
) pa
tent
pro
tect
ion
may
be
nece
ssar
y to
indu
ce fi
rms
from
dev
elop
ed c
ount
ries
to e
ngag
e in
one
of
man
y di
ffer
ent
econ
omic
tran
sact
ions
that
may
lead
to te
chno
logy
tran
sfer
. One
may
thin
k of
For
eign
Dir
ect I
nves
tmen
t (FD
I), e
xpor
ts (
to d
evel
-op
ing
natio
ns)
of c
apita
l goo
ds e
mbo
dyin
g te
chno
logi
cal k
now
l-ed
ge, j
oint
ven
ture
s be
twee
n fi
rms
in d
evel
opin
g an
d de
velo
ped
503
Eco
nom
ics,
Law
and
Int
elle
ctua
l Pro
pert
y
coun
trie
s, e
tc, W
ithou
t som
e fo
rm o
f pr
otec
tion
of th
eir
know
l-ed
ge in
the
fore
ign
mar
kets
, fir
ms
from
dev
elop
ed n
atio
ns m
aych
oose
not
to e
ngag
e in
thes
e ac
tiviti
es, b
ecau
se th
ey r
un th
e ri
skof
thei
r kn
owle
dge
bein
g co
pied
,
4. D
evel
opin
g na
tions
that
do
not p
rovi
de a
sys
tem
for
prot
ectio
n of
inte
llect
ual p
rope
rty
of im
port
ed te
chno
logy
run
the
risk
of r
e-ta
liatio
n in
term
s of
trad
e re
stri
ctio
ns, E
spec
ially
the
D,S
, gov
-er
nmen
t has
(re
cent
ly)
been
act
ive
to e
nfor
ce p
rote
ctio
n of
inte
l-le
ctua
l pro
pert
y of
D,S
, fir
ms
by m
eans
Df
trad
e m
easu
res
(Van
Wijk
and
Jun
ne, 1
993)
,
All
of th
ese
reas
ons
are
not o
nly
subj
ect t
o ac
adem
ic d
ebat
e by
theo
nsts
,th
ey w
ere
and
are
also
sub
ject
of
inte
nse
nego
tiatio
ns in
inte
rnat
iona
l org
ani-
zatio
ns s
uch
as th
e W
orld
Int
elle
ctua
l Pro
pert
y O
rgan
izat
ion
(WIP
O)
and
the
Wor
ld T
rade
Org
aniz
atio
n (W
TO
) (s
ee, e
,g.,
Mod
y, 1
990,
Van
Wijk
and
Junn
e, 1
993,
and
Wor
ld B
ank,
199
8), V
an W
ijk a
nd J
unne
(19
93)
de~c
nbe
how
in th
e 19
60s
and
1970
s, th
e la
rge
maj
ority
of
deve
lopi
ng c
ount
nes
be-
gan
to o
ppos
e th
e im
plem
enta
tion
of a
(st
rong
) pa
tent
sys
tem
in th
eir
own
econ
omie
s:
"Dev
elop
ing
coun
trie
s di
d no
t den
y th
at in
dust
rial
pro
pert
y sy
stem
sco
uld
enco
urag
e in
dust
rial
izat
ion,
but
con
tend
ed th
at in
dev
elop
ing
coun
trie
s, d
ue to
the
wea
k ec
onom
ic a
nd te
chno
logi
cal s
truc
ture
s,th
ey d
id n
ot b
ring
the
desi
red
bene
fits
. It w
as a
rgue
d th
at in
dev
el-
opin
g co
untr
ies
the
priv
ilege
s cr
eate
d by
the
indu
stri
al p
rope
rty
sys-
tem
s fa
iled
both
to s
timul
ate
inve
ntio
ns a
mon
g th
eir
own
natio
nals
and
did
not e
ncou
rage
the
rapi
d tr
ansf
er, a
ppro
pria
te a
dapt
atio
n or
wid
espr
ead
diff
usio
n of
impo
rted
tech
nolo
gy"
(p, 2
2),
Thu
s, th
e ar
gum
ent w
as tw
ofol
d: f
irst
that
the
tech
nolo
gica
l cap
abilt
ies
of f
irm
s in
dev
elop
ing
coun
trie
s w
ere
too
low
to g
ener
ate
impo
rtan
t new
in-
nova
tions
(po
int 1
abo
ve);
des
pite
the
exis
tenc
e of
a p
aten
t sys
tem
, and
, sec
-on
d, th
at th
e de
sire
d te
chno
logy
tran
sfer
(po
ints
2-4
abo
ve)
did
not m
ater
ial-
ize,
In
1975
, UN
CT
AD
pub
lishe
d a
stud
y (U
NC
TA
D, 1
975)
that
pr~
sent
ed a
lot o
f ev
iden
ce in
fav
our
of th
is p
ositi
on, F
or e
xam
ple,
the
repo
rt o
utlin
edst
atis
tical
tren
ds il
ustr
atin
g th
e m
argi
nal r
ole
of d
evel
opin
g co
untn
es in
tota
lpa
tent
s gr
ante
d in
the
wor
ld, M
oreo
ver,
it s
hów
ed th
at in
dev
elop
ing
coun
-tr
ies,
the
larg
e m
ajor
ity (
typi
cally
, mor
e th
an th
ree
quar
ters
) of
pat
ents
gran
ted
was
con
trol
led
by f
orei
gn f
irm
s (f
rom
the
deve
lope
d w
orld
),
504
TB
art V
ersp
agen
The
arg
umen
t tha
t dev
elop
ing
coun
trie
s ca
n ha
rdly
con
trib
ute
to th
e ad
-va
ncem
ent o
f th
e te
chno
logi
cal f
ront
ier
rem
ains
val
id, e
ven
mor
e so
toda
y,T
his
is r
elat
ed to
the
limite
d am
ount
of
reso
urce
s av
aila
ble
in th
ese
coun
-tn
es, i
n te
rms
of h
uman
cap
ital,
fund
s to
be
inve
sted
in f
ront
ier
rese
arch
, and
cum
ulat
ed e
xpen
ence
in r
esea
rch,
Cor
pora
te R
&D
, and
pat
entin
g, a
re a
mat
-te
r fo
r th
e de
velo
ped
natio
ns a
nd, w
ithin
them
, mos
tly f
or th
e fi
ve o
r so
larg
-es
t cou
ntne
s (E
urop
ean
Com
mss
ion,
199
8), T
hus,
with
out p
olic
y m
easu
res
aim
ed a
t inc
reas
ing
the
indi
geno
us r
esea
rch
capa
bilit
ies
of d
evel
opin
g co
un-
trie
s, a
pat
ent s
yste
m c
an h
ardl
y be
exp
ecte
d to
be
an e
ffic
ient
mea
ns o
fst
imul
atin
g in
nova
tions
in th
e po
orer
par
ts o
f th
e w
orld
, esp
ecia
lly in
a p
o-lit
ical
clim
ate
whe
re f
ree
trad
e is
hig
h on
the
agen
da,
The
rol
e of
lice
nsin
g (f
acto
r 2
abov
e) w
as a
lso
show
n to
be
impo
rtan
ton
ly f
or a
lim
ited
set o
f co
untr
ies.
In
orde
r to
use
lice
nsed
kno
wle
dge
effe
c-tiv
ely,
fir
m in
dev
elop
ing
coun
tnes
nee
d a
cert
ain
leve
l of
tech
nolo
gica
lso
phis
ticat
ion
of th
eir
own.
Ana
logo
us to
the
poin
t of
indi
geno
us r
esea
rch
capa
bilti
es r
aise
d ab
ove,
this
is e
xact
ly w
hat w
as o
ften
lack
ing,
due
tosh
orta
ges
of h
uman
cap
ital e
tc, S
ome
even
wen
t so
far
as to
sug
gest
com
pul-
sory
lice
nsin
g as
a m
eans
to e
ffec
tuat
e te
chno
logy
tran
sfer
, but
this
is e
x-tr
emel
y di
ffic
ult,
beca
use
mer
e lic
ensi
ng w
ithou
t the
tran
sfer
of
(tac
it) k
now
-ho
w f
rom
the
side
of
the
pate
nt h
olde
r ca
nnot
be
expe
cted
to b
e ef
fcie
nt(Y
anke
y, 1
987)
, The
inef
fect
iven
ess
of c
ompu
lsor
y lic
ensi
ng is
als
o sh
own
by th
e lim
ited
num
ber
of c
ases
of
such
arr
ange
men
ts (
typi
cally
less
than
5per country over the period of a decade; see Y ank~y, 1987, Table 2,1).
In p
ract
ice,
one
obs
erve
s th
at o
nly
cert
ain
coun
trie
s ar
e ab
le to
use
tech
-no
logy
lice
nsin
g as
an
effe
ctiv
e w
ay o
f (in
war
d) te
chno
logy
tran
sfer
. Typ
i-ca
lly, i
n th
ese
case
s, te
chno
logy
lice
nsin
g go
es h
and
in h
and
with
the
build
-up
of
dom
estic
tech
nolo
gica
l cap
abili
ties,
Fre
eman
(19
94)
disc
usse
s th
e ca
seof
the
Kor
ean
firm
Sam
sung
, whi
ch e
ffec
tivel
y us
ed li
cens
ing
agre
emen
tsw
ith v
ario
us W
este
rn E
urop
ean
and
U.S
. com
pani
es to
bui
ld u
p its
ow
nte
chno
logi
cal c
apab
ilty,
Ove
r tim
e, F
reem
an o
bser
ved
a ra
pid
tend
ency
for
Sam
sung
to s
witc
h fr
om r
elia
nce
on li
cens
ing
agre
emen
ts to
dev
elop
ing
itsow
n fr
ontie
r te
chno
logy
, In
fact
, tak
ing
R&
D in
tens
ity a
nd p
aten
ting
as in
di-
cato
rs, K
orea
, as
wel
l as
othe
r So
uth-
Eas
t Asi
an N
ICs,
can
be
seen
to c
on-
verge rapidly to the technology frontier in the course of the 1990s (e,g"
Eur
opea
n C
omm
ssio
n, 1
998,
for
rec
ent d
ata,
and
Soe
te a
nd V
ersp
agen
,19
93, f
or a
theo
retic
al a
nd e
mpi
rica
l ana
lysi
s). I
n ge
nera
l ter
ms,
the
conc
lu-
sion
see
ms
just
ifie
d th
at te
chno
logy
lice
nsin
g m
ay b
e a
usef
ul p
art o
f a
pol-
icy
aim
ed a
t bui
ldin
g up
loca
l tec
hnol
ogy
capa
bilti
es, b
ut it
is o
nly
a pa
rt o
fsu
ch a
pol
icy,
505
Eco
nom
ics,
Law
and
Inte
llect
ual P
rope
rty
Bar
t Ver
spag
en
Bas
ed o
n th
e ar
gum
ents
on
the
role
of
pate
ntin
g in
dev
elop
ing
coun
trie
s,a
polit
ical
dis
cuss
ion
took
pla
ce in
the
1970
s an
d 19
80s
betw
een
deve
lopi
ngco
untr
ies
and
deve
lope
d na
tions
, in
whi
ch th
e is
sue
of p
aten
t pro
tect
ion
inde
velo
ping
nat
ions
was
hea
vily
deb
ated
, In
broa
d te
rm, t
he d
evel
opin
g na
-tio
ns a
rgue
d fo
r le
ss s
tron
g pa
tent
pro
tect
ion
in th
eir
own
econ
omie
s, w
hile
the
deve
lope
d w
orld
cal
led
for
glob
al s
tren
gthe
ning
of
pate
nt p
rote
ctio
n, V
anW
ijk a
nd J
unne
(19
93)
prov
ide
an o
verv
iew
of
this
deb
ate,
as
wel
l as
som
eof
the
fine
r (l
egal
) de
tails
as
they
wer
e di
scus
sed
at v
ario
us c
onfe
renc
es o
r-ga
nize
d by
WIP
O, T
hey
also
des
crib
e ho
w, a
t the
end
of
the
1980
s, th
e de
-ve
lope
d na
tions
sta
rted
to p
ull a
way
this
deb
ate
from
WIP
O, t
ryin
g to
inte
-grate the issue of intellectual property rights 'With issues of free trade, This
trend had stared in the US in the first half of the 198G8 (Gran
strand, 1999,
Ch,
2),
In p
ract
ical
term
s, th
is m
eant
that
neg
otia
tions
abo
ut in
telle
ctua
lpr
oper
ty r
ight
s w
ere
inte
grat
ed in
to th
e U
rugu
ay R
ound
, Thi
s im
plie
d th
atne
gotia
tions
abo
ut f
ree
trad
e w
ere
coup
led
with
neg
otia
tions
on
IPR
s, le
ad-
ing
even
tual
ly to
the
so-c
alle
d T
rade
Rel
ated
asp
ects
of
Inte
llect
ual P
rope
rty
(TRIPs) agreement.
The
TR
Is a
gree
men
t is
a pa
rt o
f th
e W
TO
, and
set
s m
inim
um le
vels
of
inte
llect
ual p
rope
rty
prot
ectio
n fo
r th
e w
hole
ran
ge o
f fo
rms
òf I
PRs
(pat
-en
ts, c
opyr
ight
s, tr
adem
arks
, ind
ustr
ial d
esig
ns, e
tc,)
. It a
lso
requ
ires
sig
na-
tori
es to
est
ablis
h ce
rtai
n ba
sic
lega
l mea
sure
s to
pre
vent
infr
inge
men
t. D
is-
pute
s ov
er T
RIP
s ar
e su
bjec
t to
the
sam
e se
ttlem
ent p
roce
dure
s as
WT
O in
gene
ral.
TR
IPs
beca
me
effe
ctiv
e in
199
6, b
ut d
evel
opin
g co
untr
ies
are
gran
ted
seve
ral t
rans
ition
per
iods
app
lyin
g to
spe
cifi
c pa
rts
of th
e ag
reem
ent,
so th
at it
wil
beco
me
fully
eff
ectiv
e on
ly in
200
S,T
he T
RIP
s ag
reem
ent m
eans
that
cou
ntri
es th
at d
o no
t res
pect
the
min
i-m
um le
vels
of
IPR
s se
t can
now
exp
ect r
etal
iatio
n m
easu
res
in te
rm o
f tr
ade
rest
rict
ions
(po
int 4
abo
ve),
Van
Wijk
and
Jun
ne (
1993
) po
int o
ut th
at th
is is
an e
spec
ially
eff
ectiv
e m
easu
re in
com
bina
tion
with
the
tren
d fo
und
in m
any
deve
lopi
ng c
ount
ries
to s
witc
h fr
om a
pol
icy
of im
port
sub
stitu
tion
to e
x-po
rt-l
ed g
row
th, O
bvio
usly
, exp
ort-
led
grow
th c
ruci
ally
dep
ends
on
acce
ssto
wor
ld m
arke
ts, a
nd h
ence
the
pres
sure
to r
espe
ct th
e IP
R le
vels
set
by
TR
IPs
beco
mes
larg
er.
Thus; in the late 1990s, the debate on the role of patents in technology
tran
sfer
mai
nly
focu
ses
on p
oint
s 3
and
4 of
the
abov
e lis
t. T
he f
irst
two
poin
ts, i
.e"
the
(dir
ect)
impa
ct o
f a
pate
nt s
yste
m o
n do
mes
tic in
vent
ive
ac-
tivity in developing nations, as well as the issue of technology licensing,
wer
e sh
own
to d
epen
d cr
ucia
lly o
n do
mes
tic te
chnc
logi
cal c
apab
ilitie
s,T
hese
can
onl
y be
bui
lt up
by
mea
ns o
f a
broa
d po
licy
whi
ch in
clud
es, b
e-
side
s IP
Rs,
als
o el
emen
ts s
uch
as (
sem
i-)p
ublic
res
earc
h fa
cilti
es, e
duca
tion
and
trai
ning
of
the
labo
ur f
orce
, and
indu
stri
al a
nd tr
ade
polic
ies,
With
the
TR
IPs
agre
emen
t in
effe
ct, t
he c
onse
nsus
on
the
issu
e of
IPR
san
d te
chno
logy
tran
sfer
see
ms
inde
ed to
con
verg
e to
the
poin
ts 3
and
4 li
sted
abov
e, T
he u
nifo
rm a
nd s
tron
g IP
Rs
are
gene
rally
con
side
red
to s
timul
ate
tech
nolo
gy tr
ansf
er b
y m
eans
of
FDT
, joi
nt v
entu
res
and
by s
timul
atin
g in
-te
rnat
iona
l tra
de in
gen
eral
. Man
sfie
ld (
1993
, 199
4, a
nd 1
995)
pro
vide
s so
me
empi
rica
l evi
denc
e fo
r th
is a
ssum
ed r
elat
ions
hip,
The
fir
st tw
o of
thes
e pa
pers
by
Man
sfie
ld a
naly
zes
surv
ey d
ata
obta
ined
for
100
U.S
, fir
ms
in a
ran
ge o
f in
dust
res.
Abo
ut h
alf
of th
e fi
rms
in th
issa
mpl
e re
port
ed th
at s
tren
gth
or w
eakn
ess
of I
PRs
has
a st
rong
eff
ect o
nw
heth
er o
r no
t dir
ect i
nves
tmen
t wil
be m
ade,
Thi
s ef
fect
was
fou
nd to
be
stro
nges
t in
the
chem
ical
s an
d el
ectr
ical
equ
ipm
ent s
ecto
rs, a
nd to
app
lym
ostly
to in
vest
men
t rel
ated
to R
&D
fac
iltie
s an
d fa
cilti
es to
man
ufac
ture
com
plet
e pr
oduc
ts, T
he to
p co
untr
ies
that
wer
e re
port
ed a
s ha
ving
too
wea
kIP
Rs
to p
erm
t inv
estm
ent i
n jo
int v
entu
res
with
loca
l par
tner
s w
ere
Indi
a(4
4% o
f re
spon
dent
s in
dica
te I
PRs
are
too
wea
k), N
iger
ia (
33%
), B
razi
l(3
2%),
Tha
iland
(31
%),
Ind
ones
ia a
nd T
aiw
an (
28%
). T
he s
ame
coun
trie
sw
ere
repo
rted
to h
ave
IPR
s to
o w
eak
to p
erm
t tra
nsfe
r of
the
new
est o
r m
ost
effe
ctiv
e te
chno
logy
to w
holly
ow
ned
subs
idia
ries
, or
to p
erm
t lic
ensi
ng o
fth
e ne
wes
t or
mos
t eff
ectiv
e te
chno
logy
, Man
sfie
ld (
1995
) ex
tend
s th
e su
r-ve
y to
Jap
anes
e an
d G
erm
an fi
rms,
and
als
o un
dert
akes
mor
e so
phis
ticat
edec
onom
etric
test
ing,
The
find
ings
, aga
in, s
how
that
wea
k IP
Rs
may
be
anim
port
ant b
arer
to te
chno
logy
tran
sfer
,T
he W
orld
Ban
k, in
its
Wor
ld D
evel
opm
ent R
epor
t 199
8/99
, als
o ch
am-
pion
s st
rong
and
uni
form
IPR
s as
in th
e T
RIP
s ag
reem
ent.
The
ir em
piric
alev
iden
ce m
ainl
y co
nsis
ts o
f th
e M
ansf
ield
sur
veys
men
tione
d ab
ove,
Des
pite
this
app
aren
t con
sens
us, t
he a
cade
mic
deb
ate
on th
e is
sue
of T
RIP
s is
far
from
con
clus
ive,
Sie
beck
(19
90)
conc
lude
d th
at th
e th
eory
did
not
pro
vide
any
stro
ng a
nsw
ers
on h
ow s
tron
g IP
Rs
in d
evel
opin
g co
untr
ies
shou
ld b
e,an
d th
at th
e em
piri
cal s
tudi
es o
n th
e is
sue
wer
e to
o fe
w to
allo
w f
irm
con
-cl
usio
ns, I
n 19
92, a
con
fere
nce
was
con
vene
d at
the
Nat
iona
l Aca
dem
y of
Scie
nces
in th
e U
.S"
whi
ch d
ebat
ed th
e is
sues
, In
the
proc
eedi
ngs,
whi
chw
ere
publ
ishe
d as
Wal
lers
tein
, Mog
ee e
t al,
(199
3), n
o fi
rm c
oncl
usio
n w
asre
ache
d on
whe
ther
a u
nifo
rm s
yste
m o
f str
ong
IPR
s w
as to
be
pref
erre
dov
er a
sys
tem
with
inte
rnat
iona
l diff
eren
tiatio
n in
IPR
s,7
Sin
ce th
en, a
l-th
ough
the
firs
t of
thes
e tw
o va
rian
ts n
ow s
eem
s th
e de
fac
to s
ituat
ion
sinc
e
7 Se
e, e
.g"
the
cont
ribu
ted
chap
ters
by
Sher
woo
d (1
993)
and
Fri
scht
ak (
1993
),
506
507
Eco
nom
ics,
Law
and
Int
elle
ctua
l Pro
pert
yB
art V
ersp
agen
20.6
Dis
cuss
ion
and
Issu
es f
or F
urth
er R
esea
rch
prod
uct d
eman
d, a
nd th
e el
astic
ity o
f the
ext
ent o
f tec
hnic
al im
prov
emen
tsw
ith r
egar
d to
R&
D e
xpen
ditu
res,
Follo
win
g K
lem
pere
r (1
990)
, the
lite
ratu
re m
ostly
con
side
rs th
e is
sue
ofpa
tent
bre
adth
in a
con
text
of
so-c
alle
d ho
rizo
ntal
pro
duct
dif
fere
ntia
tion,
In
this approach, technological innovation is seen as a process that produces
mor
e va
rian
ts o
f a
cons
umpt
ion
good
. Bec
ause
con
sum
er ta
stes
dif
fer,
eac
hne
w v
aria
nt c
reat
es it
s ow
n de
man
d, w
ithou
t ful
ly c
aptu
ring
the
mar
ket.
Abr
oad
pate
nt th
en c
aptu
res
a la
rge
par
of th
e ho
rizon
tally
diff
eren
tiate
dpr
oduc
t spa
ce,
Van
Dijk
(19
94, C
hapt
er 7
) pr
esen
ts a
mod
el in
whi
ch tw
o co
untr
ies,
which trade with each other, choose the optimal
leve
l of
pate
nt b
read
th, H
earrves at the following conclusions:
TR
IPs
cam
e in
to e
ffec
t, th
e th
eore
tical
deb
ate
has
not s
uppl
ied
the
fina
l an-
swer
, as
wil
be a
rgue
d in
the
next
sec
tion,
The
deb
ate
on th
e st
reng
th a
nd s
cope
of
IPR
s br
iefl
y ou
tline
d in
the
pre-
vious sections is stil
larg
ely
unre
solv
ed, a
t lea
st a
t an
acad
emic
leve
l, an
dm
ore
theo
retic
al a
nd e
mpi
rica
l res
earc
h is
nec
essa
ry to
arr
ve a
t use
ful c
on-
clus
ions
. Thi
s se
ctio
n w
il at
tem
pt to
out
line
thre
e an
gles
fro
m w
hich
fur
ther
cent
ribu
tions
may
be
mad
e, T
hese
thre
e po
ints
are
all
som
ewha
t pre
limin
ary,
and
mus
t be
cons
ider
ed a
s st
artin
g po
ints
for
fur
ther
res
earc
h, r
athe
r th
anfi
naliz
ed a
nd te
stab
le p
ropo
sitio
ns,
The
fir
st is
sue
rela
tes
to th
e dy
nam
ic e
ffec
ts o
f pa
tent
bre
adth
, The
eco
-no
mic
mod
els
we
have
ava
ilabl
e no
w p
rovi
de a
cle
ar-c
ut, a
lthou
gh a
dmit-
tedl
y so
mew
hat a
bstr
act,
argu
men
t abo
ut th
e st
atic
eff
ects
of
pate
nt,b
read
th.
From
a s
tatic
poi
nt o
f vi
ew, i
,e"
whe
n lo
okin
g at
onl
y on
e in
vent
ion
with
out
taking into account the cumulative nature of inventions, and hence
the effect
that
an
indi
vidu
al p
aten
t may
hav
e on
fut
ure
tech
nolo
gy, b
road
er p
aten
tsgi
ve u
p be
nefi
ts f
or th
e co
nsum
er b
ut th
ey p
rovi
de in
cent
ives
for
the
inve
n-to
r. A
n op
timal
poi
nt in
this
trad
e-of
f m
ay b
e ca
lcul
ated
und
er c
erta
in (
ab-
stra
ct)
assu
mpt
ions
, The
se m
odel
s co
uld
be e
xten
ded
to ta
ke in
to a
ccou
ntdy
nam
ic e
ffci
ency
by
anal
yzin
g ho
w o
ne in
vent
ion
may
gen
erat
e fu
ture
in-
vent
ions
, and
hen
ce a
lso
wha
t the
wel
fare
eff
ects
of
thes
e fu
ture
inve
ntio
nsm
ay b
e, T
he m
ain
chal
leng
e he
re is
to f
ind
a sa
tisfa
ctor
y w
ay o
f re
pres
entin
gth
e de
pend
ence
of
one
inve
ntio
n on
pre
viou
s on
es, T
his
depe
nden
ce s
truc
-tu
re is
ofte
n qu
ite c
ompl
icat
ed a
nd a
lso
usua
lly q
uite
impo
ssib
le to
pre
dict
.H
ence
the
stan
dard
mod
els
of f
ully
rat
iona
l fir
m b
ehav
ior
may
not
be
very
usef
ul h
ere,
and
an
alte
rnat
ive
wou
ld h
ave
to b
e de
velo
ped,
In
this
res
pect
,kn
owle
dge
from
the
engi
neer
ing
scie
nces
on
how
inve
ntio
ns a
re m
ade,
and
whi
ch r
elev
ant s
ourc
es o
f kn
owle
dge
exis
t, as
wel
l as
from
pra
ctic
al s
tudi
eson
the
use
of p
aten
ting
liter
atur
e by
eng
inee
rs, a
re v
ery
rele
vant
as
inpu
ts to
mor
e re
alis
tic e
cono
mic
mod
els,
The
sec
ond
issu
e re
late
s to
the
ques
tion
of w
heth
er a
pat
ent r
egim
e w
ith(m
ore
or le
ss)
unif
orm
pro
tect
ion
leve
ls is
des
irab
le f
rom
a p
oint
of
view
of
tota
l wor
ld w
elfa
re (
see
Sher
woo
d, 1
993,
Fri
scht
ak, 1
993)
, As
was
see
nab
ove,
mic
roec
onom
ic th
eory
ana
lyze
s th
e le
ngth
and
bre
adth
of
pate
nts,
The
leng
th o
f a
pate
nt r
efer
s to
its
dura
tion,
whi
le th
e br
eadt
h re
fers
to th
esc
ope
of p
rote
ctio
n, N
ordh
aus
(196
9) a
naly
zed
the
'opt
imal
' pat
ent l
engt
h,an
d co
nclu
ded
that
this
dep
ends
on
vari
able
s su
ch a
s th
e pr
ice
elas
ticity
of
"(W
)hen
cou
ntrì
es p
lace
equ
al w
eigh
t on
prof
its a
nd c
onsu
mer
s'su
rplu
s of
thei
r ow
n ci
tizen
s (o
o ,)
pat
ent b
read
ths
are
too
narr
ow,
This result reflects the existence of a
posi
tive
exte
rnal
ity fl
owin
gfr
om e
ach
coun
try'
s pa
tent
bre
adth
to th
e pr
ofit
and
cons
umer
s' s
ur-
plus
enj
oyed
by
citiz
ens
of th
e ot
her
coun
try,
(.,
,) (
E)x
cept
in v
ery
spec
ial c
ircu
mst
ance
s, e
quili
briu
m p
aten
t bre
adth
s ar
e no
t ide
ntic
alin
the
two
coun
trie
s, (
oo ,)
Fur
ther
, if
equi
lbri
um b
read
ths
are
suff
i-ci
ently
asy
mm
etri
c, th
ere
is n
o sy
mm
etri
c pa
tent
pol
icy
that
Par
eto-
dom
inat
es th
e or
igin
al e
quili
briu
m"
(p. 1
53-4
).
In p
ract
ical
term
s, th
ese
resu
lts e
stab
lish
thre
e m
ain
poin
ts. F
irst
, in
an in
-te
rnat
iona
l con
text
, spi
love
rs b
etw
een
coun
trie
s ar
e re
leva
nt d
ecis
ion
vari
-ab
les
in d
esig
ning
nat
iona
l reg
imes
of
inte
llect
ual p
rope
rty
righ
ts, M
ore
spe-
cifi
cally
, nat
iona
l gov
ernm
ents
may
wan
t to
set t
he s
cope
of
prot
ectio
n at
abr
oade
r le
vel t
han
they
wou
ld if
they
bas
ed th
eir
polic
y ju
st o
n na
tiona
l con
-si
dera
tions
, Sec
ond,
ther
e is
not
muc
h th
eore
tical
sup
port
for
the
pref
eren
ceof
a u
nifo
rm w
orld
wid
e le
vel o
f pa
tent
pro
tect
ion
(bre
adth
) ov
er a
sys
tem
with
dif
fere
ntia
ted
pate
nt b
read
th, T
hird
, int
erna
tiona
l coo
rdin
atio
n of
the
scop
e of
pat
ent p
rote
ctio
n (b
read
th)
does
not
nec
essa
rily
lead
to u
nequ
ivo-
cally
'bet
ter'
resu
lts th
an a
reg
ime
in w
hich
eac
h co
untr
y se
ts it
s pa
tent
pol
-ic
y in
depe
nden
tly o
f th
e re
st o
f th
e w
orld
,S I
n fa
ct, i
n di
scus
sing
his
res
ults
,V
an D
ijk m
akes
the
follo
win
g, q
uite
str
ong,
sta
tem
ent:
8 In
the
latte
r co
nclu
sion
, the
con
cept
of
'Par
eto-
optim
ality
' pla
ys a
larg
e ro
le in
Van
Dijk
's
anal
ysis
, Thi
s co
ncep
t ref
ers
to th
e no
tion
that
it is
dif
ficu
lt to
wei
ght i
ndiv
idua
ls' w
elfa
rele
veL
. A s
o-ca
lled
Pare
to-i
mpr
ovem
ent i
s on
e in
whi
ch a
ll in
divi
dual
s in
the
econ
omy
at le
ast
have
the
sam
e le
vel o
f w
elfa
re a
s be
fore
the
impr
ovem
ent,
and
at le
ast o
ne in
divi
dual
has
a
508
509
Eco
nom
ics,
Law
and
Int
elle
ctua
l Pro
pert
yBart Verspagen
"In
term
s of
our
mod
el, o
ne c
ould
say
that
the
nort
h ha
s a
high
and
the
sout
h ha
s a
low
inno
vatio
n de
nsity
, The
mod
el p
redi
cts
that
asym
met
ric
inno
vatio
n de
nsiti
es le
ad to
ext
ensi
ve p
aten
t pro
tect
ion
in th
e in
nova
tion-
inte
nsiv
e re
gion
and
nar
row
pro
tect
ion
in th
ew
eake
r re
gion
, Thi
s si
tuat
ion
can
inde
ed b
e ob
serv
ed in
the
wor
ld(O
o')'
The
pro
posa
l of n
orth
ern
coun
trie
s, h
owev
er, t
o ex
tend
thei
rst
anda
rds
of p
rote
ctio
n to
the
sout
h do
es n
ot P
aret
o-im
prov
e th
egl
obal
wel
fare
if in
nova
tion
dens
ities
are
too
diff
eren
t (as
they
see
mto be)," (p, 154-5),
The
deb
ate
of th
e 19
70s
and
1980
s al
read
y cl
early
sho
wed
that
in o
rder
for
(str
ong)
IPR
s to
be
effe
ctiv
e in
dev
elop
ing
coun
trie
s, th
e do
mes
tic c
apa-
bilty
of
thes
e co
untr
ies
to g
ener
ate
and
use
new
tech
nolo
gies
nee
ds to
be
enha
nced
(se
e ab
ove)
, Rel
ated
ly, t
he m
odel
by
Van
Dijk
cite
d ab
ove
poin
tsto
the
fact
that
a r
egim
e w
ith u
nifo
rm a
nd s
tron
g w
orld
wid
e IP
Rs
may
be
more effcient (in terms of welfare) when differences between countries in
term
s of
tech
nolo
gica
l cap
abilt
ies
are
smal
L. In
the
abov
e-m
entio
ned
Wor
ldD
evel
opm
ent R
epor
t 199
8/99
, the
Wor
ld B
ank
also
poi
nts
to th
e im
port
ance
of b
uild
ing
loca
l kno
wle
dge
base
s, T
hus,
I w
ould
arg
ue th
at T
RIP
s is
not
tobe
con
side
red
as th
e fi
nal s
olut
ion
to p
robl
ems
of te
chno
logy
tran
sfer
and
deve
lopm
ent,
but r
athe
r as
a m
ost u
sefu
l ste
p in
aw
aren
ess
of th
e im
port
ance
of I
PRs
and
tech
nolo
gy in
gen
eral
. In
addi
tion
to a
gree
men
ts o
f IP
Rs,
the
deve
lope
d an
d de
velo
ping
wor
ld s
houl
d co
ntin
ue to
foc
us o
n bu
ildin
g up
dom
estic
tech
nolo
gica
l cap
abilt
ies
in d
evel
opin
g co
untr
es. I
PR
s pl
ay a
nim
port
ant r
ole
in th
is p
roce
ss, b
ut th
ere
is m
ore
to it
than
just
IPR
s.W
hat r
ole
coul
d in
tern
atio
nal o
rgan
izat
ions
suc
h as
the
Wor
ld B
ank,
WIP
O a
nd W
TO
pla
y in
this
pro
cess
? W
TO
, alth
ough
it is
the
plat
form
at
whi
ch T
RIP
s w
as n
egot
iate
d, a
nd a
t whi
ch c
onfl
cts
on T
RIP
s m
ust b
e su
b-m
itted
, doe
s no
t see
m to
be
a lik
ely
cand
idat
e fo
r su
ch a
rol
e, I
ts n
atur
e as
abo
dy to
enh
ance
fre
e tr
ade
does
not
eas
ily c
onfo
rm to
pol
icy
goal
s th
at c
on-
cern
dom
estic
issu
es, s
uch
as th
e st
imul
atio
n of
R&
D in
fras
truc
ture
, Mor
e-ov
er, I
PRs
are
only
of
indi
rect
rel
evan
ce f
or W
TO
, sin
ce it
s m
ain
role
is th
epr
omot
ion
of f
ree
trad
e, T
he W
orld
Ban
k ob
viou
sly
has
a ta
sk in
this
are
a,an
d th
e W
orld
Dev
elop
men
t Rep
ort c
onta
ins
man
y ex
ampl
es o
f ho
w th
isor
gani
zatio
n at
tem
pts
to h
elp
build
up
loca
l kno
wle
dge
infr
astr
uctu
res,
One
may
wel
l arg
ue th
at a
lso
WIP
O m
ay p
laya
rol
e in
this
pro
cess
, de-
spite
the
fact
that
one
may
arg
ue th
at W
IPO
is a
n in
tern
atio
nal p
latfo
rm,
muc
h lik
e W
TO
, whi
ch s
houl
d no
t 'in
terv
ene'
in lo
cal i
ssue
s, H
owev
er, t
heis
sue
of in
tern
atio
nallP
Rs,
whi
ch is
, of
cour
se, a
mai
n co
ncer
n of
WIP
O, i
sin
deed
clo
sely
rel
ated
to d
omes
tic te
chno
logy
cap
abilt
ies,
and
thus
the
issu
ese
ems
to b
e m
ore
at th
e he
art o
f th
e m
atte
r fo
r W
IPO
than
for
WT
O. A
s I
have
trie
d to
arg
ue h
ere,
the
new
inst
itutio
nal e
nvir
onm
ent (
TR
IPs)
add
s an
-ot
her
dim
ensi
on to
this
issu
e, r
athe
r th
an m
akin
g it
obso
lete
. Thu
s, g
iven
the
incr
ease
d ne
ed f
or in
tern
atio
nal a
ttent
ion
to te
chno
logy
cap
acity
bui
ldin
g in
deve
lopi
ng c
ount
ries
, one
may
imag
ine
that
WIP
O w
ould
, in
som
e w
ay, a
d-dr
ess
this
issu
e,T
he th
ird
issu
e th
at I
wan
t to
addr
ess
in th
is s
ectio
n bu
ilds,
in a
way
, on
the
firs
t one
, bec
ause
it c
onsi
ders
the
issu
e of
pat
ent b
read
th, I
n th
e ec
ono-
met
ric
liter
atur
e on
inte
rnat
iona
l R&
D s
pilo
vers
, one
of
the
'hot
issu
es' i
s
Obv
ious
ly, V
an D
ijk's
mod
el is
but
one
in a
larg
e lit
erat
ure
in th
is f
ield
,O
ther
mod
els
of th
e ro
le o
f in
tern
atio
nal p
rope
rty
righ
ts r
egim
es a
nd in
tern
a-tio
nal t
rade
are
, for
exa
mpl
e, D
eard
orff
(19
92),
Diw
an a
nd R
odri
k (1
991)
,H
elpm
an (
1993
) an
d C
hin
and
Gro
ssm
an (
1990
), A
ll of
thes
e m
odel
s ar
ehi
ghly
sty
lized
theo
retic
al c
onst
ruct
s, fo
r w
hich
one
nee
ds a
gre
at d
eal o
fim
agin
atio
n to
app
ly th
em to
pra
ctic
al s
ituat
ions
.9 O
ther
mod
els,
suc
h" a
s th
eon
e by
Dea
rdor
ff (
1991
) an
d th
e on
e by
Diw
an a
nd R
odri
k (1
991)
, are
mor
epo
sitiv
e to
war
ds th
e id
ea o
f st
reng
then
ing
glob
al p
aten
t pro
tect
ion.
lO A
ll in
all,
the
conc
lusi
on r
each
ed b
y Pr
imo
Bra
ga (
1990
), n
amel
y th
at e
cono
mic
theo
ry d
oes
not p
rovi
de a
cle
ar-c
ut a
nsw
er to
man
y qu
estio
ns in
rel
atio
n to
tech
nolo
gy tr
ansf
er a
nd in
telle
ctua
l pro
pert
y ri
ghts
, stil
see
ms
to b
e va
lid,
Nev
erth
eles
s, o
ne m
ay d
raw
som
e po
sitiv
e co
nclu
sion
s fr
om th
e th
eore
ti-ca
l deb
ate,
des
pite
its
high
leve
l of
abst
ract
ion
and
rela
tive
inde
term
nacy
,Fi
rst,
it se
ems
unlik
ely
that
the
unif
orm
and
str
ong
IPR
s in
TR
IPs
wil
prov
ebe
nefi
cial
fro
m a
poi
nt o
f vi
ew th
at ta
kes
into
acc
ount
the
inte
rest
s of
bot
hde
velo
ped
and
deve
lopi
ng n
atio
ns, A
cas
e fo
r di
ffer
entia
tion
of p
aten
t pro
-te
ctio
n by
leve
ls o
f de
velo
pmen
t can
be
mad
e fr
om a
n ec
onom
ic p
oint
of
view
as
wel
l as
from
a h
uman
itari
an o
r et
hica
l (e,
g" A
IDS
med
icin
es)
poin
tof
vie
w, H
owev
er, m
ore
empi
rica
l res
earc
h is
hig
hly
wel
com
e in
sup
port
of
such
a v
iew
, Sec
ond,
it is
cle
ar th
at s
uppo
rtiv
e m
easu
res
in te
rms
of te
chno
-lo
gica
l cap
acity
bui
ldin
g m
ay g
reat
ly in
crea
se th
e ef
fcie
ncy
of te
chno
logy
tran
sfer
, and
thus
, in
a w
ay, m
ake
the
TR
IPs
agre
emen
t (as
it is
pre
sent
lyou
tline
d) m
ore
effi
cien
t.
high
er le
vel o
f w
elfa
re, N
ote
that
this
is a
rat
her
stro
ng r
equi
rem
ent,
beca
use
one
may
imag
ine
situ
atio
ns in
whi
ch a
par
t of
the
wel
fare
of
a (s
mal
l) g
roup
of
indi
vidu
als
is 's
acri
fice
d' f
or a
larg
er im
prov
emen
t in
the
wel
fare
of
anot
her
(lar
ger)
gro
up,
9 Se
e D
avid
(19
93)
for
a ge
nera
l dis
cuss
ion
of th
e di
ffcu
lties
of
appl
ying
eco
nom
ic th
eory
to
the
prac
tice
of in
telle
ctua
l pro
pert
rig
hts,
10 I
am
afr
aid
this
is o
ne o
f th
ose
situ
atio
ns w
here
the
(iro
nic)
say
ing
appl
ies
that
one
can
alw
ays
find
an
econ
omis
t to
defe
nd o
ne's
pos
ition
, no
mat
ter
how
out
rage
ous
this
pos
ition
is,
510
511
Eco
nom
ics,
Law
and
Int
elle
ctua
l Pro
pert
yB
art V
ersp
agen
the question whether or not such spil
over
s ar
e em
bodi
ed in
trad
ed g
oods
and/
or F
DI,
Coe
, Hel
pman
et a
t. (1
997)
hav
e fo
rcef
ully
arg
ued
that
R&
Dsp
ilove
rs a
re in
deed
em
bodi
ed in
trad
e go
ods,
whi
le L
icht
enbe
rg a
nd V
anPottelsberghe (1996) found that R&D spil
over
s ar
e co
nnec
ted
to F
DI
flow
sbe
twee
n co
untr
ies,
The
se p
aper
s do
not
inve
stig
ate
the
caus
al e
ffec
t bet
wee
nem
bodi
ed (
eith
er in
trad
e or
FD
I) s
pilo
vers
and
IPR
s, T
hus,
a f
irst
line
of
rese
arch
that
may
pro
ve u
sefu
l to
the
deba
te o
utlin
ed in
the
prev
ious
sec
tion
could be to incorporate IPRs in such models of spil
over
s,H
owev
er, F
ager
berg
and
Ver
spag
en (
1998
) al
so in
trod
uce
into
thes
emodels so-called disembodied spil
over
s , T
hey
follo
w e
arlie
r w
ork
by,
amon
g ot
hers
, Cor
nwal
l (19
77)
and
Abr
amov
itz (
1979
) in
rel
atin
g th
ese
dis-
embodied spilovers to the initial
leve
l of
labo
ur p
rodu
ctiv
ity in
an
indu
stry
,A
n es
timat
ed n
egat
ive
sign
on
this
var
iabl
e is
inte
rpre
ted
as e
vide
nce
of th
ehy
poth
esis
that
rel
ativ
ely
back
war
d co
untr
ies
bene
fit fr
om th
e in
tern
atio
nal
diffusion of technology, Because a variable taking into account tF,ade-
embodied R&D spil
over
s à
la C
oe, H
elpm
an e
t at.
is a
lso
pres
ent i
n th
eFa
gerb
erg
and
Ver
spag
en m
odel
, the
eff
ect r
elat
ed to
initi
al la
bour
pro
duc-
tivity
is in
terp
rete
d as
dis
embo
died
spi
love
rs,
Fage
rber
g an
d V
ersp
agen
fin
d th
at in
a s
ampl
e of
14
OE
CD
cou
ntri
es f
orth
e pe
riod
1975
-199
5, d
isem
bodi
ed s
pilo
vers
hav
e a
muc
h st
rong
er im
pact
on productivity growth than trade-embodied spilovers. il other words, the
inte
rnat
iona
l dif
fusi
on o
f te
chno
logy
mai
nly
take
s pl
ace
thro
ugh
othe
r ch
an-
nels
than
inte
rnat
iona
l tra
de in
goo
ds. A
dmitt
edly
, Fag
erbe
rg a
nd V
ersp
agen
do n
ot c
onsi
der
the
effe
cts
of F
DI
embo
died
spi
love
rs, S
til, t
heir
res
ults
seem to underline the crucial importance of spil
overs through other chan-
nels
than
em
bodi
men
t (th
ink
of in
tern
atio
nal m
obilt
y of
labo
ur, i
nter
na-
tiona
l con
tact
s at
con
fere
nces
, sci
entif
ic a
nd te
chni
cal l
itera
ture
, pat
ent
spec
ific
atio
ns, e
tc,)
,O
ne im
port
ant c
avea
t mus
t be
plac
ed w
ith r
egar
d to
the
appl
icat
ion
ofth
ese
resu
lts to
the
rela
tions
hip
betw
een
tech
nolo
gy tr
ansf
er a
nd p
aten
ts,
Ver
spag
en (
1991
), in
an
empi
rica
l mod
el th
at d
id n
ot in
clud
e an
y ty
pe o
fem
bodi
ed s
pilo
vers
, fou
nd th
at d
isem
bodi
ed s
pilo
vers
, of
the
type
that
Fage
rber
g an
d V
ersp
agen
est
imat
e, te
nd to
dec
reas
e w
ith th
e le
vel o
f th
ete
chno
logy
gap
bet
wee
n tw
o co
untr
ies,
il o
ther
wor
ds, f
or c
ount
ries
lagg
ing
far behind the world technological frontier, 'technological congruence'
(Abr
amov
itz, 1
979)
may
be
too
low
to a
llow
them
to b
enef
it fr
om d
isem
bod-
ied
spilo
vers
, Thu
s, th
e re
sults
that
Fag
erbe
rg a
nd V
ersp
agen
fin
d m
ay in
-de
ed b
e ra
ther
spe
cifi
c to
the
set o
f co
untr
ies
incl
uded
in th
eir
anal
ysis
.
Alth
ough
muc
h m
ore
rese
arch
is n
eces
sary
to e
xten
d th
e Fa
gerb
erg
and
Ver
spag
en r
esul
ts to
the
issu
e of
Nor
th-S
outh
tech
nolo
gy tr
ansf
er (
e,g"
ex-
tend
ing
the
set o
f co
untr
ies
in th
e an
alys
is, a
s w
ell a
s ta
king
into
acc
ount
FDI)
, the
res
ults
do
seem
to in
dica
te th
at, t
o a
cert
ain
exte
nt, f
ree-
ridi
ng o
nforeign knowledge is possible, Whether or
not such a process involves sub-
stan
tial i
nfri
ngem
ent o
n pa
tent
hol
ders
' rig
hts
is n
ot c
lear
fro
m th
e Fa
gerb
erg
and
Ver
spag
en a
naly
sis,
How
ever
, it i
s w
ell i
mag
inab
le th
at m
akin
g IP
Rs
'str
onge
r', e
spec
ially
in th
ose
coun
trie
s be
nefi
ting
from
the
spilo
vers
, i.e
.,th
e de
velo
ping
cou
ntri
es, r
educ
es th
e sc
ope
for
such
dis
embo
died
spi
love
rs,
At t
he s
ame
time,
acc
ordi
ng to
the
argu
men
ts s
et o
ut in
the
prev
ious
sec
tion,
such
str
onge
r IP
Rs
may
stim
ulat
e tr
ade
and
FDI,
and
ther
eby
incr
ease
tech
-no
logy
tran
sfer
rel
ated
to th
ese
fact
ors.
Whe
ther
or
not t
he n
et e
ffec
t on
the
amount of spil
over
s ta
king
pla
ce is
pos
itive
or
nega
tive
is h
ighl
y sp
ecul
a-tiv
e, g
iven
the
curr
ent s
tate
of
the
ar in
this
fie
ld o
f re
sear
ch,
il the models discussed very briefly here, the patent system, licensing
and
trad
e in
kno
w-h
ow d
o no
t pla
y an
exp
licit
role
, The
mod
els
are
rath
erab
stra
ct, a
lthou
gh w
ell-
foun
ded
in h
isto
rica
l res
earc
h, A
use
ful v
enue
for
furt
her
rese
,arc
h se
ems
to b
e a
mor
e ex
plic
it an
alys
is o
f IP
R s
yste
ms,
Thi
sco
uld
wel
l sta
rt f
rom
an
hist
oric
al in
vest
igat
ion
of th
e ro
le o
f th
ese
syst
ems
in d
evel
opm
ent a
nd c
atch
ing-
up-b
ased
gro
wth
, and
fro
m th
ere
be in
clud
ed in
the
exis
ting
(em
piri
cal)
mod
els,
The
fou
rth
and
fina
l iss
ue th
at I
wou
ld li
ke to
rai
se in
this
sec
tion
con-
cern
s th
e to
pic
of a
ppro
pria
te te
chno
logy
. As
is w
ell-
know
n fr
om th
e de
vel-
opm
ent l
itera
ture
, not
all
tech
nolo
gies
dev
elop
ed in
OE
CD
cou
ntri
es c
anre
adily
be
used
in d
evel
opin
g co
untr
ies.
Man
y of
thes
e te
chno
logi
es, o
r at
leas
t the
ir s
peci
fic
impl
emen
tatio
n, a
re s
peci
fic
to th
e (a
dvan
ced)
nee
ds o
fth
e so
ciet
ies
they
are
dev
elop
ed in
, or
depe
nd o
n in
fras
truc
ture
s th
at a
re n
otco
mm
only
fou
nd in
man
y of
the
deve
lopi
ng c
ount
ries
, Abr
amov
itz (
1994
)ha
s te
rmed
this
'a la
ck o
f te
chno
logi
cal c
ongr
uenc
e',
Thi
s im
plie
s th
at n
ot a
ll R
&D
eff
orts
by
firm
s in
OE
CD
cou
ntri
es a
rere
leva
nt f
or th
e is
sue
of te
chno
logy
tran
sfer
. il g
ener
al, i
t is
quite
dif
ficu
lt to
mak
e a
clea
r-cu
t dis
tinct
ion
betw
een
sect
ors
with
mor
e or
less
app
ropr
iate
tech
nolo
gy, F
or e
xam
ple,
alth
ough
muc
h of
the
rese
arch
in th
e el
ectr
onic
sse
ctor
is o
bvio
usly
bey
ond
the
reac
h of
man
y de
velo
ping
eco
nom
ies,
the
rela
tivel
y hi
gh-t
ech
fiel
d of
mob
ile te
leph
ony
is a
wel
l-kn
own
exam
ple
of a
fiel
d w
here
dif
fusi
on p
oten
tial i
s la
rge
in m
any
deve
lopi
ng c
ount
ries
, due
toa
low
leve
l of
com
mtm
ent t
o an
inst
alle
d ba
se o
f w
ired
com
mun
icat
ion,
How
ever
, one
fie
ld f
or w
hich
the
outc
omes
-of
R&
D c
arri
ed o
ut in
OE
CD
coun
trie
s cl
earl
y ha
ve la
rge
cons
eque
nces
for
dev
elop
ing
natio
ns, i
s bi
otec
h-
512
513
Eco
nom
ics,
Law
and
Int
elle
ctua
l Pro
pert
yB
art V
ersp
agen
nolo
gy (
see,
e,g
" A
char
ya, 1
995
and
Van
Wijk
and
Jun
ne, 1
993)
. The
im-
pact
of
biot
echn
olog
y on
dev
elop
ing
coun
trie
s is
a v
ast a
rea
of r
esea
rch
inw
hich
I c
anno
t cla
im a
ny e
xper
tise,
but
I w
ould
nev
erth
eles
s lik
e to
con
clud
eth
is p
aper
with
two
obse
rvat
ions
on
this
fie
ld,
The
fir
st o
bser
vatio
n I
wou
ld li
ke to
mak
e is
that
in a
fie
ld w
here
the
econ
omic
rel
evan
ce o
f a
tech
nolo
gy is
larg
er f
or d
evel
opin
g co
untr
ies
than
for
the
deve
lope
d w
orld
(as
one
may
arg
ue b
iote
chno
~og
y is
; tro
pica
l dis
-ea
ses
are
anot
her,
per
haps
eve
n m
ore
clea
r ca
se),
the
impo
rtan
ce o
f IP
Rs
inde
velo
ping
cou
ntri
es is
esp
ecia
lly h
igh,
Giv
en th
at th
e m
arke
t for
pro
duct
sba
sed
on th
ese
tech
nolo
gies
is s
mal
l(er
) in
dev
elop
ed c
ount
ries
, str
ong
IPR
sin
the
deve
lope
d w
orld
may
sim
ply
prov
e to
be
too
smal
l an
ince
ntiv
e to
stim
ulat
e R
&D
(V
an W
ijk a
nd J
unne
, 199
3), T
his
show
s th
at g
ener
ic p
olic
yre
com
men
datio
ns m
ay b
e m
isle
adin
g, a
nd s
peci
fic
know
ledg
e of
tech
nolo
-gi
es a
nd e
cono
mic
, soc
ial o
r po
litic
al c
ircu
mst
ance
s is
ver
y va
luab
le. I
nte
rm o
f th
e im
plic
atio
ns f
or f
urth
er r
esea
rch,
this
mea
ns th
at c
ase
stlid
ies,
wel
l-fo
rmul
ated
with
bot
h th
eore
tical
and
pol
icy
conc
erns
, rem
ain
of g
reat
valu
e, The
sec
ond
obse
rvat
ion
is th
at th
e 'o
ld' c
once
rn th
at m
ultin
atio
nal c
om-
pani
esfr
om th
e de
velo
ped
wor
ld g
ain
cont
rol o
ver
tech
nolo
gies
that
are
cru
-ci
al to
the
fate
of
deve
lopi
ng c
ount
ries
is a
lso
espe
cial
ly g
reat
in th
ose
case
s,T
he W
orld
Ban
k (W
orld
Dev
elop
men
t Rep
ort 1
998/
99, B
ox 2
,6 a
nd r
elat
edte
xt)
disc
usse
s th
e is
sue
of c
ompe
nsat
ion
whe
n 'b
iopr
ospe
ctin
g st
rike
s go
ld',
Exa
mpl
es a
re m
entio
ned
of c
ases
whe
re la
rge
phar
mac
eutic
al c
ompa
nies
from
the
deve
lope
d w
orld
"ap
prop
riat
e va
luab
le b
iom
edic
al k
now
ledg
e fr
omin
dige
nous
peo
ples
" (W
DR
, Box
2,6
). H
owev
er, a
tren
d is
als
o si
gnal
ed in
whi
ch c
ompa
nies
pro
vide
com
pens
atio
n in
the
form
of
lum
p su
m p
aym
ents
and/
or r
oyal
ty s
hari
ng to
loca
l com
mun
ities
, It s
eem
s to
me
that
suc
h a
tren
dm
ight
wel
l be
form
aliz
ed in
to in
tern
atio
nal r
ules
to p
reve
nt s
uch
'reve
rse
tech
nolo
gy tr
ansf
er' w
ithou
t ade
quat
e co
mpe
nsat
ion,
Ach
arya
, R. (
1995
), T
he I
mpa
ct o
f N
ew T
echn
olog
ies
on E
cono
mic
Gro
wth
and
Tra
de. A
Cas
e St
udy
of B
iote
chno
logy
, Ph,
D. t
hesi
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ions
and
Opt
ions
for
Dev
elop
ing
Cou
ntrie
s', M
aatr
icht
, UN
U/In
tech
,
Ver
spag
en, B
, (19
91).
'A N
ew E
mpi
rica
l App
roac
h to
Cat
chin
g U
p or
Fal
ling
Ben
ind'
,S
truc
tura
l Cha
nge
and
Eco
nom
ic D
ynam
ics
2: 3
59-3
80,
Wal
lers
tein
, M,B
" M
,E, M
ogee
and
R,A
. Sch
oen
(eds
,), (
1993
). G
loba
l Dim
ensi
ons
ofIn
telle
ctua
l Pro
pert
y R
ight
s in
Sci
ence
and
Tec
hnol
ogy,
Was
hing
ton,
D,C
,: N
atio
nal
Aca
dem
y Pr
ess,
Wor
ld B
ank
(199
8), W
orld
Dev
elop
men
t Rep
ort.
Kno
wle
dge
for
Dev
elop
men
t, 19
98//9
99,
Oxf
ord:
Oxf
ord
Uni
vers
ity P
ress
,
Yan
key,
G,S
,-A
, (19
87).
Int
erna
tiona
l Pat
ents
and
Tec
hnol
ogy
Tra
nsfe
r to
Les
s D
evel
oped
Countries. The case of
Gha
na a
nd N
iger
ia, A
lder
shot
: Ave
bury
,
Cha
pter
21
SU
MM
AR
Y A
ND
RE
FLE
CT
ION
SU
PO
N F
UR
TH
ER
DE
VE
LOP
ME
NT
S!
Ove
Gra
nstr
and
Chalmers University of
Tec
hnol
ogy,
Dep
t, of
Ind
ustr
ial M
anag
emen
t and
Eco
nom
ics,
Göt
ebor
g, S
wed
en
Cha
pter
con
tent
s:21
. Sum
mar
of
Prev
ious
Cha
pter
s ...
......
...,..
..,..,
......
.....,
......
......
......
......
......
......
..,...
......
..520
21.2
Ref
lect
ions
upo
n Fu
rthe
r In
terd
isci
plin
ar R
esea
rch
......
......
......
......
......
......
......
.....,
.. 54
721
.3 R
efle
ctio
ns u
pon
Tea
chin
g In
telle
ctua
l Pro
pert
y....
......
......
......
......
....,.
......
......
.,..,.
..., 5
5421
.4 T
eFhn
olog
y an
d IP
- A
Fin
al R
efle
ctio
n....
......
......
......
......
......
...,..
......
..,..,
..,...
......
..,..
557
21.5 Literature References.......................................,....,......,....,.......... 561
Abs
trac
t:T
his
conc
ludi
ng c
hapt
er s
umm
ariz
es th
e pr
eced
ing
chap
ters
, usi
ng a
com
mon
stru
ctur
e, w
hich
thro
ugho
ut th
e ch
apte
rs h
ighl
ight
s th
eir
mai
n fo
cus,
key
/nov
elco
ncep
ts, a
ppro
ach/
empi
rica
l dat
a, m
ain
find
ings
/arg
umen
ts, a
nd s
ugge
stio
nsfo
r fu
rthe
r re
sear
ch, T
he d
iver
sity
of
the
chap
ters
in th
ese
resp
ects
is r
ich,
whi
ch is
per
haps
not
so
surp
risi
ng, b
ut th
ere
are
also
cle
ar d
iffe
renc
es b
etw
een
the
two
grou
ps o
f ch
apte
rs r
epre
sent
ing
econ
omic
s an
d la
w, T
hs o
bser
vatio
ngi
ves
reas
on to
ref
lect
ove
r th
e pa
st a
nd f
utur
e in
tera
ctio
n be
twee
n th
ese
two
disc
iplin
es in
the
IP f
ield
, The
nee
d fo
r pl
ural
ism
in c
hoic
e of
res
earc
h pr
ob-
lems and methods, as well as the need for disciplinar perspectives comple-
men
tary
to e
cono
mic
s an
d la
w, i
s po
inte
d ou
t. A
t the
sam
e tim
e, th
e ad
vent
of
the
IP e
ra h
as le
d to
a r
apid
ly g
row
ing
rese
arch
age
nda,
cal
ling
for
som
e pr
i-or
ities
, The
cha
pter
als
o re
flec
ts o
n so
me
prio
ritie
s fo
r in
terd
isci
plin
ar r
e-se
arch
and
teac
hing
on
the
econ
omic
s an
d la
w o
f in
telle
ctua
l pro
pert
y, T
hech
apte
r en
ds w
ith a
spe
cula
tive
refl
ectio
n ab
out t
he f
utur
e of
the
IP s
yste
m a
ndits
inte
ract
ion
with
the
econ
omic
and
lega
l sys
tem
s,
518
i Hel
pful
com
men
ts o
n th
is c
hapt
er h
ave
been
rec
eive
d fr
om U
lf P
etru
sson
,
519
() t'
rnJ1
t'trn
nrl(
pd' K
rrm
nm;r
(: T
nwnn
d In
.tp.ll
p.r.
tual
Prn
np.r
tv. S
19-S
ó2.