Innovation Sticks: The Limited Case for Penalizing Failures to Innovate

72 Pages Posted: 4 May 2016  

Ian Ayres

Yale University - Yale Law School; Yale University - Yale School of Management

Amy Kapczynski

Yale University - Law School

Multiple version iconThere are 2 versions of this paper

Date Written: August 1, 2015

Abstract

When policymakers and academics think about designing optimal innovation incentives, they almost exclusively limit their considerations to various types of re-ward incentives — that is, innovation “carrots.” But in this Article, we show that, under specific circumstances, innovation “sticks” — potential penalties for failures to innovate — can play valuable roles in our innovation policy, either alone or in conjunction with innovation carrots. We also provide examples of several innovation sticks that have already been used with apparent success, including the federal Corporate Average Fuel Economy standards. Finally, we apply our approach to a new area — the problem of car fatalities — to illustrate the potential of innovation sticks to yield substantial social benefits. Our model suggests that a relatively simple system of yardstick penalties could help reduce national auto fatalities by as much as 20 percent simply by bringing laggard entities (such as companies and states) up to the median.

Keywords: intellectual property, patents, carrots, sticks, auto fatalities, innovation policy, innovation

Suggested Citation

Ayres, Ian and Kapczynski, Amy, Innovation Sticks: The Limited Case for Penalizing Failures to Innovate (August 1, 2015). University of Chicago Law Review, Vol. 81, p. 1781, 2015. Available at SSRN: https://ssrn.com/abstract=2774492

Ian Ayres

Yale University - Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
203-432-7101 (Phone)
203-432-2592 (Fax)

Yale University - Yale School of Management

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Amy Kapczynski (Contact Author)

Yale University - Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States

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