Inventors and impostors: an analysis of patent examination with self-selection of firms into RandD

I present a model in which firms differing in RandD productivity choose between ambitious research projects, which are socially desirable, and unambitious ones, which are socially undesirable. The patent office must decide how rigorously to examine applications, which affects the probability of weed...

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Bibliographic Details
Published in:The Journal of industrial economics 2013-09, Vol.61 (3), p.660-699
Main Author: Schuett, Florian
Format: Article
Language:English
Subjects:
Exploitation
Inventories
Productivity
Research and development
Size of enterprise
U.S.A
Online Access:Get full text
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Summary:I present a model in which firms differing in RandD productivity choose between ambitious research projects, which are socially desirable, and unambitious ones, which are socially undesirable. The patent office must decide how rigorously to examine applications, which affects the probability of weeding out bad applications but also how firms self-select into RandD. I show that when a subset of firms is financially constrained, the patent office should examine their applications more rigorously. This generates a number of predictions that I test by exploiting the 1982 reform that introduced firm-size dependent fees in the United States. Reprinted by permission of Blackwell Publishers
ISSN:0022-1821
DOI:10.1111/joie.12029