On the Winner-Take-All Principle in Innovation Races

37 Pages Posted: 11 Dec 2007 Last revised: 9 Jun 2014

Date Written: March 23, 2009

Abstract

What is the optimal allocation of prizes in an innovation race? Should the winner take all, or is it preferable that the original inventor shares the market with subsequent independent duplicators? Some recent papers in law and economics have argued that the latter, more permissive solution is socially preferable under mild conditions. We re-examine that issue, arguing that a permissive regime may turn the innovation race into a waiting game, reducing the power of incentives, and may invite socially wasteful duplicative R&D expenditures. In a model that accounts for these effects, the winner-take-all system turns out to be preferable in a broad set of circumstances, especially in highly innovative industries.

Keywords: patent race, patent law, winner-take-all

JEL Classification: K11, L10

Suggested Citation

Denicolo, Vincenzo and Franzoni, Luigi Alberto, On the Winner-Take-All Principle in Innovation Races (March 23, 2009). Available at SSRN: https://ssrn.com/abstract=1069702 or http://dx.doi.org/10.2139/ssrn.1069702

Vincenzo Denicolo

University of Bologna ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Luigi Alberto Franzoni (Contact Author)

University of Bologna ( email )

P.zza Scaravilli 2
Bologna, 40124
Italy
0512098488 (Phone)
+39-051-221968 (Fax)

HOME PAGE: https://www.unibo.it/sitoweb/luigi.franzoni/en

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