Cumulative Innovation, Sampling and the Hold-Up Problem

Rufus Pollock ()

No 06-29, DRUID Working Papers from DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies

Abstract: With cumulative innovation and imperfect information about the value of innovations, intellectual property rights can result in hold-up and therefore it may be better not to have them. Extending the basic cumulative innovation model to include 'sampling' by second-stage firms, we find that the lower the cost of sampling, or the larger the differential between high and low value second-stage innovations, the more likely it is that a regime without intellectual property rights will be preferable. Thus, technological change which reduces the cost of encountering and trialling new 'ideas' implies a reduction in the socially optimal level of rights such as patents and copyright.

Keywords: Cumulative Innovation; Hold-Up; Sampling; Intellectual Property (search for similar items in EconPapers)
JEL-codes: K3 L5 O3 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-com, nep-ino, nep-ipr, nep-pr~ and nep-law
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Working Paper: Cumulative Innovation, Sampling and the Hold-Up Problem (2007)
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