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on Technology and Industrial Dynamics |
| By: | Magazzini Laura (Department of Economics, University of Verona); Fabio Pammolli (IMT Lucca Institute for Advanced Studies Author-Name: Massimo Riccaboni; IMT Lucca Institute for Advanced Studies) |
| Abstract: | : We analyse the consequences of the increasing complexity of R&D on within- and between-patent competition in the pharmaceutical industry. The intensity of competition is measured by jointly considering the timing from market launch to patent expiry, the strength of between-patent competition as well as competition introduced by generic producers. A simple model is proposed that predicts the shrinking of product lifetimes in the presence of correlated parallel R&D projects and market portfolios. The model is tested using data on pharmaceutical products sold in Europe and in the US. Based on our model we are able to estimate the impact of R&D complexity and relatedness among R&D portfolios on the value of innovative drugs. |
| Keywords: | Patent value, innovation, R&D competition, Pharmaceutical industry. |
| JEL: | D23 D83 O34 O31 L13 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:ial:wpaper:3/2013&r=tid |
| By: | Arijit Mukherjee (School of Business and Economics, Loughborough University, UK) |
| Abstract: | It is generally believed that a weak patent protection makes the consumers and the society better off compared to a strong patent protection by increasing the intensity of competition if the weak patent protection does not affect innovation. We show that this conclusion may not hold if the innovator can take other non-production strategies, such as product differentiation, to reduce the intensity of product-market competition. A weak patent protection may reduce consumer surplus and social welfare by inducing product differentiation by the innovator. We show that the type of product-market competition and the market demand function play important roles in this respect. Hence, there can be an argument for a strong patent protection even if it does not affect innovation. |
| Keywords: | Patent protection; Product differentiation; Welfare |
| JEL: | D21 D43 L13 O34 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:lbo:lbowps:2013_06&r=tid |
| By: | Igor Letina |
| Abstract: | When firms decide to invest in R&D, they have to choose not only the amount of resources to invest, but also which research projects to develop. This paper investigates the market portfolio of research projects. Contrary to most of the literature, which focuses only on the level of investment in innovation, this model captures both the variety of research projects undertaken and the amount of duplication of research. A characterization of the equilibrium market portfolio is provided. It is shown that an increase in the number of firms increases the variety of developed projects and increases the amount of duplication of research. An increase in the intensity of competition among firms leads to an increase in the variety of developed projects and a decrease in the amount of duplication of research. A characterization of the socially optimal portfolio is provided. It is shown under which conditions the market invests suboptimally in the variety and duplication of research projects. Market underinvestment in the variety of R&D projects is demonstrated for a large class of product market models. |
| Keywords: | Innovation, competition, R&D portfolio, market structure |
| JEL: | L13 L22 O31 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:127&r=tid |
| By: | Allain, Marie-Laure; Henry, Emeric; Kyle, Margaret |
| Abstract: | The sale of R&D projects through licensing facilitates the division of labor between research and development activities. This vertical specialization can improve the overall efficiency of the innovative process. However, these gains depend on the timing of the sale: the buyer of an R&D project should assume development at the stage at which he has an efficiency advantage. We show that in an environment where the seller is overconfident about the value of the project, she may delay the sale to the more efficient firm in order to provide verifiable information about its quality, though this delay implies higher total development costs for the project. We obtain a condition for the equilibrium timing of licensing and examine how factors such as the intensity of competition between potential buyers influence it. We show that a wide array of different explanations, based on differences in information, beliefs or risk profiles, lead to the same qualitative results. We present empirical evidence from pharmaceutical licensing contracts that is consistent with our theoretical predictions. |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:27399&r=tid |