We model an employee's decision to pursue an innovative idea at his employing firm (internally) or as a start-up (externally). We characterize an idea by its market profitability and the degree of positive/negative externality that it imposes on the employing firm's profits. The innovation...

We present a model of process innovation that offers an explanation for the negative relationship between patent strength and R&D investment. We show that under the popularly used damage rule of reasonable royalties, the innovator might favor imitation. Since imitation is discouraged for strong...

We study an infinite-horizon cumulative innovation model, in which patents are characterized bytheir length and the likelihood of being ruled valid in a patent infringement litigation. Strengtheningpatent protection via a greater validity or length has two opposing effects on innovation: 1)...