Download this Paper Open PDF in Browser

Sequential Innovation, Patents, And Imitation

34 Pages Posted: 9 Feb 2000  

James E. Bessen

Boston University - School of Law; Research on Innovation

Eric Maskin

Princeton University - Department of Economics; Harvard University - Department of Economics; Massachusetts Institute of Technology (MIT) - Department of Economics

Date Written: January 2000


How could such industries as software, semiconductors, and computers have been so innovative despite historically weak patent protection? We argue that if innovation is both sequential and complementary--as it certainly has been in those industries--competition can increase firms' future profits thus offsetting short-term dissipation of rents. A simple model also shows that in such a dynamic industry, patent protection may reduce overall innovation and social welfare. The natural experiment that occurred when patent protection was extended to software in the 1980?s provides a test of this model. Standard arguments would predict that R&D intensity and productivity should have increased among patenting firms. Consistent with our model, however, these increases did not occur. Other evidence supporting our model includes a distinctive pattern of cross-licensing in these industries and a positive relationship between rates of innovation and firm entry.

JEL Classification: O31, O34

Suggested Citation

Bessen, James E. and Maskin, Eric, Sequential Innovation, Patents, And Imitation (January 2000). MIT Dept. of Economics Working Paper No. 00-01. Available at SSRN: or

James E. Bessen (Contact Author)

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Research on Innovation ( email )

202 High Head Rd.
Harpswell, ME 04079
United States
617-531-2092 (Phone)

Eric S. Maskin

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
(617) 495-4167 (Phone)
(617) 495-7730 (Fax)

Massachusetts Institute of Technology (MIT) - Department of Economics

50 Memorial Drive
Cambridge, MA 02142
United States

Princeton University - Department of Economics ( email )

Institute for Advanced Study
Einstein Drive West Building Room 318
Princeton, NJ 08540
United States
(609) 734-8309 (Phone)
(609) 951-4457 (Fax)

Paper statistics

Abstract Views