It is commonly argued that when innovation is sequential, and the product has network externalities, incumbents build a large network that inefficiently blocks the entry of future incompatible innovators. This paper shows that when intellectual property rights permit some degree of compatibility...

This paper introduces the idea that strong patent protection can lead innovators to rest on their laurels, into a simple tournament based framework. Concentrating on optimal patent protection, the one that maximizes production, the model shows that there is a positive relationship between the...

Patentability of basic research together with complementarity between basic research and commercialization development leads to the problem called "anti-commons" where assigning exclusive rights of a resource to more than one entity reduces usage of the resource. Transition from (not-for-profit)...

The theoretical literature on the cumulative innovation process has emphasized the role of ex-ante licensing – namely, licensing agreements negotiated before the follow-on innovator has sunk its R&D investment – in mitigating the risk of hold-up of future innovations. In this paper, we...

This paper examines a model of sequential cost-saving innovations financed by venture capital. Successful firms in research can enter the market with a cost advantage over older firms and acquire market power. Innovators have the technical knowledge to conduct R&D but lack the necessary...