Patents as an Incentive to Innovate

Dominique Guellec

in The Economics of the European Patent System

Published in print February 2007 | ISBN: 9780199216987
Published online May 2007 | e-ISBN: 9780191711831 | DOI:
 Patents as an Incentive to Innovate

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This chapter investigates the rationale of patents, their economic role, and the circumstances in which they are the most effective. The utilitarian theory considers patents as an incentive — a policy instrument used by society for encouraging inventions. Patents are a response to the public good nature of knowledge, which makes imitation easier than invention. They are one of the instruments of innovation policy along with grants, prizes, subsidies, universities, and public laboratories. Compared with other instruments, patents are more market friendly, leaving all technical and economic choices to firms and customers; and they restrict the use of knowledge. The evidence so far supports the view that patents are quite effective in encouraging innovation, especially in certain industries like pharmaceuticals or chemicals, and less so in electronics, and have little direct effect in other industries, especially in services.

Keywords: utilitarian theory; innovation policy; competition policy; policy instrument; imitation

Chapter.  18654 words.  Illustrated.

Subjects: Economic Development and Growth

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