DOI QR코드

DOI QR Code

International R&D Contest with IPR Coordination and Cost Externality

  • Lee, Sanghack (Department of International Commerce, Kookmin University) ;
  • Nam, Bo-Ra (Department of International Trade, Dongguk University)
  • Received : 2019.06.20
  • Accepted : 2019.08.15
  • Published : 2019.08.31

Abstract

Purpose - This paper examines the international R&D contest in which the extent of intellectual property right (IPR) affects both the size of prize for the winning firm and the extent of positive spillover through cost of firms. Recognizing the possibility of incomplete protection of IPR, the present paper analyzes the effect of changes in the extent of IPR on payoffs to firms and social welfare. Design/methodology - This paper examines coordination of IPRs by countries in economic integration. The paper then develops a general model of international R&D contest with incomplete protection of IPR. An increase in the extent of IPR augments the share of the prize the winning firm can appropriate, while decreasing the positive cost externality. To derive sharper results, the paper considers the cases of linear and fixed spillovers. Findings - Under plausible assumptions, an increase in the IPR augments the payoff to each firm and the aggregate payoffs as well. The paper also shows that the number of firms participating in the R&D contest can be endogenously determined in the two-stage R&D contest. The higher the extent of cost spillover, and the larger the effective prize, the more firms participate in the international R&D contest. Originality/value - Existing studies assume that firms winning the R&D contest enjoy perfect IPR to the output of their R&D activities. This is a very restrictive assumption in that other firms can copy the new products or processes. By allowing for the incompleteness of the IPR, the present paper develops a more realistic model of R&D contest. The novelty of the present paper is to allow for the possibility that the higher extent of IPR increases the prize and decreases positive cost externality at the same time. The findings of the present paper can serve as a basis for government policy toward R&D activities of firms and protection of IPRs.

Keywords

References

  1. D'Aspremont, C. and A. Jacquemin (1988), "Cooperative and Non-cooperative R&D in Duopoly with Spillovers", American Economic Review, 78, 1133-1137.
  2. Cheong, Sun-Tae (2013), "The Status of East Asian FTA and A Large Region-wide FTA Scenario", Journal of International Trade & Commerce, 9(6), 663-682. https://doi.org/10.16980/JITC.9.6.201311.663
  3. Kang, Moon-Sung (2006), "Trade Policy Mix: IPR Protection and R&D Subsidies", Canadian Journal of Economics, 39(3), 744-757. https://doi.org/10.1111/j.1540-5982.2006.00367.x
  4. Konrad, K. A. (2009), Strategy and Dynamics in Contests, New York, NY: Oxford University Press.
  5. Lee, Sang-Hack and J. H. Kang (1998), "Collective Contests with Externalities", European Journal of Political Economy, 14(4), 727-738. https://doi.org/10.1016/S0176-2680(98)00034-2
  6. Lee, Sang-Hack (2007), "Contests with Size Effects through Costs", European Journal of Political Economy, 23(4), 1190-1193. https://doi.org/10.1016/j.ejpoleco.2006.08.002
  7. Lee, Sang-Hack and Bo-Ra Nam (2018), "The Effects of Economic Integration on Intellectual Property Rights and Research and Development", Journal of Industrial Economics and Business, 31(5), 1751-1772. https://doi.org/10.22558/jieb.2018.10.31.5.1751
  8. Park, Sung-Hoon and S. Lee (2019), "How do Risk-averse Litigants Set Contingent Feesfor Risk-neutral Lawyers?", Review of Law and Economics, 15(2), 1-19.
  9. Romer, P. M. (1986), "Increasing Returns and Long-run Growth", Journal of Political Economy, 94(5), 1002-1037. https://doi.org/10.1086/261420
  10. Romer, P. M. (1990), "Endogenous Technical Change", Journal of Political Economy, 98, S71-S102. https://doi.org/10.1086/261725
  11. Spencer, B. J. and J. A. Brander (1983), "International R&D Rivalry and Industrial Strategy", Review of Economic Studies, 50(4), 707-722. https://doi.org/10.2307/2297771
  12. Tullock, G. (1980), "Efficient Rent Seeking". In J. M. Buchanan, R. D. Tollison and G. Tullock (Eds.), Toward a Theory of the Rent-seeking Society, College Station, TX: Texas A&M University Press, 97-112.