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Secrecy, the patent puzzle and endogenous growth

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  • Klein, Michael A.
Abstract
Endogenous growth models typically assume that innovations are protected solely by patents. Consequently, they predict that strengthening patent protection stimulates innovation by increasing the private return to R&D. This contrasts with empirical evidence that: (1) firms routinely employ a combination of patents and secrecy and (2) stronger patent regimes have been associated with increased patenting but not increased innovation, a finding referred to as the “patent puzzle.” In this paper, I develop a novel model of endogenous growth that is consistent with this evidence. Successful innovators’ choose an appropriation strategy in the form of a patent, secrecy mix. Both protection methods are imperfect, and innovators face a trade-off between secrecy’s superior protection against imitation and patenting’s protection against rival innovation. I demonstrate that growth oriented policy changes generate important economic effects through their impact on the endogenous appropriation strategies of innovators.

Suggested Citation

  • Klein, Michael A., 2020. "Secrecy, the patent puzzle and endogenous growth," European Economic Review, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:eecrev:v:126:y:2020:i:c:s0014292120300775
    DOI: 10.1016/j.euroecorev.2020.103445
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Elias Dinopoulos & Constantinos Syropoulos & Theofanis Tsoulouhas, 2023. "Global Innovation Contests," Games, MDPI, vol. 14(1), pages 1-24, February.
    2. Robin Cowan & Nicolas Jonard & Ruth Samson, 2024. "Strategies of search and patenting under different IPR regimes," Working Papers of BETA 2024-20, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    3. Suzuki, Keishun, 2020. "Patent Puzzle, Inflation, and Internal Financial Constraint," MPRA Paper 101937, University Library of Munich, Germany.
    4. Michael Klein & Yibai Yang, 2024. "Blocking Patents, Rent Protection and Economic Growth"," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 52, pages 1-20, April.
    5. Klein, Michael A., 2022. "The reward and contract theories of patents in a model of endogenous growth," European Economic Review, Elsevier, vol. 147(C).
    6. Michael Klein & Fuat Sener, 2023. "Product Innovation, Diffusion and Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 48, pages 178-201, April.
    7. Dinopoulos, Elias & Grieben, Wolf-Heimo & Şener, Fuat, 2023. "A Policy Conundrum: Schumpeterian Growth or Job Creation?," Economic Modelling, Elsevier, vol. 126(C).
    8. Iwaisako, Tatsuro, 2023. "Optimal mix of R&D subsidy and patent protection in a heterogeneous-industry R&D-based growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 154(C).
    9. Michael Klein & Fuat Sener, 2023. "Product Innovation, Diffusion and Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 48, pages 178-201, April.
    10. Romero-Capa, José Luis & Martinez, Diana & Encalada, Juan & Ordoñez, Jose, 2022. "Incidencia de la innovación y calidad institucional sobre el crecimiento económico, un análisis con datos de panel para países clasificados por su nivel de ingresos," Revista Económica, Centro de Investigaciones Sociales y Económicas, Universidad Nacional de Loja, vol. 10(2), pages 82-95, Julio.

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    More about this item

    Keywords

    Innovation; Intellectual property rights; Endogenous growth;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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