Competing inventors and the incentive to invent

Daniel F. Spulber

doi:10.1093/icc/dts013

Competing inventors and the incentive to invent

Daniel F. Spulber^*

^*Corresponding author for this work

Strategy

Research output: Contribution to journal › Article › peer-review

6 Scopus citations

Abstract

This article introduces a comprehensive model of the market for inventions that examines how both supply-side competition and demand-side competition affect the incentive to invent. Supply-side competition refers to competition among inventors and demand-side competition refers to competition among producers in the downstream product market. The main results are as follows. Competing inventors have greater average expected returns to invention when the downstream market is competitive than when the downstream product market is monopolistic so downstream competition increases the incentive to invent. A multi-project monopoly inventor has greater incremental expected returns to invention when the downstream market is competitive than when it is monopolistic so downstream competition again increases the incentive to invent. On the supply side competition among inventors generates more R&D projects than a multi-project monopoly inventor when the demand side of the market for inventions is competitive. The reason for this result is that when the downstream market is competitive the average expected returns to invention with competition among inventors are greater than the incremental expected returns to invention with a multi-project monopoly inventor.

Original language	English (US)
Pages (from-to)	33-72
Number of pages	40
Journal	Industrial and Corporate Change
Volume	22
Issue number	1
DOIs	https://doi.org/10.1093/icc/dts013
State	Published - Feb 2013

Funding

The author thanks the referees for helpful comments that greatly improved the presentation and analysis. He also thanks David Abrams, Sugato Bhattacharyya, David Haddock, Shane Greenstein, F. Scott Kieff, Lynne Kiesling, Tom Lyon, Steve Salant, Jagadeesh Sivadasan, Scott Stern, Phil Weiser, Christopher Yoo, Martin Zelder, and Arvids Ziedonis for helpful comments on an earlier version. He gratefully acknowledges the support of a research grant from the Ewing Marion Kauffman Foundation.

ASJC Scopus subject areas

Economics and Econometrics

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10.1093/icc/dts013

Cite this

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title = "Competing inventors and the incentive to invent",

abstract = "This article introduces a comprehensive model of the market for inventions that examines how both supply-side competition and demand-side competition affect the incentive to invent. Supply-side competition refers to competition among inventors and demand-side competition refers to competition among producers in the downstream product market. The main results are as follows. Competing inventors have greater average expected returns to invention when the downstream market is competitive than when the downstream product market is monopolistic so downstream competition increases the incentive to invent. A multi-project monopoly inventor has greater incremental expected returns to invention when the downstream market is competitive than when it is monopolistic so downstream competition again increases the incentive to invent. On the supply side competition among inventors generates more R&D projects than a multi-project monopoly inventor when the demand side of the market for inventions is competitive. The reason for this result is that when the downstream market is competitive the average expected returns to invention with competition among inventors are greater than the incremental expected returns to invention with a multi-project monopoly inventor.",

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doi = "10.1093/icc/dts013",

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Competing inventors and the incentive to invent

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ASJC Scopus subject areas

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