Patent Scope and Technology Choice

This paper analyzes effects of stronger patent rights on R&D and innovation. It presents a model where the scope of a patent affects an entrant firm's technology choice and thereby the amount of wasteful R&D duplication. The model predicts that negative effects of duplication can be sufficiently large to warrant stronger patent rights in the form of broad patent scope. This holds if the incumbent's innovation gain is large and the patented technology has a small advantage over alternative technologies.