Adam Karbowski

The Elasticity-Based Approach to Enterprise Innovation

Abstract The goal of this paper is to present a formal model of firm innovation that simultaneously analyzes innovation factors characteristic to the Schumpeterian strand of industrial organization literature and the know-how strand. Corporate R&D intensity serves here as an input measure of firm innovation. R&D intensity can be defined as a ratio of firm’s R&D spending to the firm’s sales (total revenues). On the basis of formal analysis it is found that R&D intensity is fully determined by three complementary factors, i.e. a firm’s technological competence (supply-side factor), consumer preference for quality and price of a product (demand-side factor), as well as a moderator factor associated with the knowledge spillovers, which occur between competing firms in the industry. Since the above factors are expressed in terms of elasticities, the presented model is called an elasticity-based model of firm innovation. Further, within the model framework, it is shown how horizontal R&D cooperation alleviates the free-rider problem that can discourage a firm’s innovation activities. It is next postulated that horizontal R&D cooperation can be effectively treated as a complementary tool (to such traditional solutions as patent protection and public research subsidies) for solving the problem of negative externalities in an industry with pervasive knowledge spillovers.

Controversy over the Economic Justifications for Patent Protection

The objective of this paper is to show the necessity of reviving the debate on the economic justifications for patent protection. On the one hand, we see the need for the assessment of the overall welfare consequences of the existing systems of patent protection, and on the other hand, we believe that major changes to the patent law should be considered. Critical review of the discussion on patents shows that the weaknesses of many arguments for patent protection, as well as the resulting adverse effects of the patent laws have been known for a long time. The analysis of the strategic behavior of firms shows that patent protection has often been misused and may negatively affect the total welfare.

R&D spillovers and cartelization of industries with differentiated products

The objective of this article is to investigate the impact of research and development (R&D) spillovers on cartelization of industries characterized by differentiated products. For simplicity, we focus on the duopoly market in which firms compete according to the Stackelberg leadership model. Numerical analysis shows that as long as products offered on the market are at least slightly differentiated, it is beneficial for firms to cooperate at the R&D stage, and form a cartel at the final product market. The threat of cartelizing industry is not present only under fully homogenous goods’ competition. But, since the vast majority of product markets trade in differentiated goods, tightening cooperation in R&D generates a serious threat of industry cartelization. Thus, significant antitrust issues emerge.

Cartels and patents, and R&D expenditures of companies

The aim of this paper is to assess the impact of R&D cartel, full industry cartel, and patents on process innovation of companies, and consumer surplus, and total welfare. The reference scenario is here the Cournot rivalry without patent protection of inventions. In this paper, the quadratic costs of production of goods and R&D investments are assumed. The results of modelling and numerical analyses allowed to state that R&D cooperation (in the form of R&D cartel) is more effective and socially preferred instrument to stimulate innovation in the industry than interfirm rivalry motivated by patents. However, in industries characterized by relatively weak or medium knowledge spillovers, the most effective tool to enhance innovation is interfirm rivalry without patents. The latter constitutes one more argument against patents.

Patents and R&D Cartels

The objective of this paper is to compare the impact of R&D competition and R&D cooperation under patent protection and under no patent protection on enterprise innovation and performance. For simplicity we focus on the case of duopoly. In particular, the impact of R&D competition and R&D cooperation on enterprise research investments, output, market price, company profits, consumer surplus, and total social welfare was investigated. The analysis revealed that when competition is Cournot, for any level of research spillovers, the R&D investments under patent protection are smaller than in the case of no patent protection. When firms create a research cartel, then, for any level of spillovers, the R&D investments will be higher than those under patent protection with Cournot competition. However, they will be higher than the R&D investments when Cournot competition takes place in the case of no patent protection only for relatively high levels of spillovers. When the level of spillovers is relatively low, the R&D investments in the case of Cournot competition with no patents are higher than in the case of research cartel formed by the duopolists.

Imagine-Self Perspective-Taking and Rational Self-Interested Behavior in a Simple Experimental Normal-Form Game

The purpose of this study is to explore the link between imagine-self perspective-taking and rational self-interested behavior in experimental normal-form games. Drawing on the concept of sympathy developed by Adam Smith and further literature on perspective-taking in games, we hypothesize that introduction of imagine-self perspective-taking by decision-makers promotes rational self-interested behavior in a simple experimental normal-form game. In our study, we examined behavior of 404 undergraduate students in the two-person game, in which the participant can suffer a monetary loss only if she plays her Nash equilibrium strategy and the opponent plays her dominated strategy. Results suggest that the threat of suffering monetary losses effectively discourages the participants from choosing Nash equilibrium strategy. In general, players may take into account that opponents choose dominated strategies due to specific not self-interested motivations or errors. However, adopting imagine-self perspective by the participants leads to more Nash equilibrium choices, perhaps by alleviating participants’ attributions of susceptibility to errors or non-self-interested motivation to the opponents.

Kontrowersje związane z moralnym uzasadnieniem ochrony patentowej w biotechnologii

The following paper presents and discusses controversies over the moral justification for patent protection in biotechnology. Special emphasis was put on the controversy over the moral justification for patent protection of stem cells. By referring to arguments of (i) human dignity and (ii) patentability criteria , the moral justifiability of patent protection of stem cells was put in serious doubt. In a further section of the paper, the moral problems linked to patent protection in biotechnology were shown in a broader political and economic view. In that section of the paper, the preliminary concept of solving some of the discussed problems was sketched out (i.e. the introduction of decision criteria based on the system of values shared by the members of a given society).

Conditional and Unconditional Bidding in Takeovers : Experimental Evidence

The objective of this paper is to use laboratory experiments to test the dynamic theory of free riding among the target shareholders during a takeover attempt. We construct our experiments to reflect the dynamics of unconditional bidding suggested by Harrington and Prokop (1993) and the dynamics of conditional bidding analyzed by Prokop (2003). The experimental results show that the observed tendering probabilities are higher than the theoretically predicted values in the case of unconditional bidding. Thus the actual behavior of shareholders is characterized by much less free riding than predicted by the theory of unconditional tender offers. In the case of conditional offers, the theoretical predictions for the tendering probabilities are confirmed by the laboratory behavior of shareholders in the case of multiple bidding. As suggested by the theory, the tendering probabilities are lower under multiple conditional bids than under unconditional offers.

Patent Hold-Up and Royalty Stacking: The Case of Multiple Downstream Firms

The objective of this paper is twofold. First, we study the patent hold-up problem in game-theoretic framework. We show that in subgame perfect equilibrium of the patent hold-up game the innovating manufacturer exerts reduced effort to develop the new product and the patent holder obtains the entire value of product innovation. Second, we show that royalty stacking, which is believed to magnify the patent hold-up, may cause less severe problems than the ones predicted by Lemley and Shapiro [11] when competition on the downstream product market is introduced.