1. Who is afraid of pirates? An experiment on the deterrence of innovation by imitation
- Author
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Marco Kleine, Christoph Engel, and Law and Economics
- Subjects
jel:D62 ,jel:D63 ,Strategy and Management ,media_common.quotation_subject ,jel:D22 ,jel:H41 ,Management Science and Operations Research ,Intellectual property ,jel:H23 ,Profit (economics) ,Microeconomics ,Appropriation ,Innovator ,Argument ,Management of Technology and Innovation ,Economics ,Deterrence theory ,Marketing ,media_common ,jel:C91 ,jel:O31 ,Incentive ,jel:K11 ,Chilling effect ,Repeated game ,Innovation, imitation, appropriation, patent, fairness of desert ,Standard theory ,jel:L17 ,Imitation - Abstract
In the policy debate, intellectual property is often justified by what seems to be a straightforward argument: if innovators are not protected against others appropriating their ideas, incentives for innovation are suboptimally low. Now, in most industries and for most potential users, appropriating a foreign innovation is itself an investment decision fraught with cost and risk. Nonetheless, standard theory predicts too little innovation. Arguably the problem is exacerbated by the sensitivity of innovators to fairness; imitators do get a free lunch, after all. We model the situation as a game and test it in the lab. We find more appropriation, but also more innovation than predicted by standard theory. In the lab, the prospect of giving imitators a free lunch does not have a chilling effect on innovation. This even holds if innovation automatically spills over to an outsider and if successful imitation reduces the innovator's profit. Beliefs and the analysis of experiences in the repeated game demonstrate that participants are sensitive to the fairness problem. But this concern is not strong enough to outweigh the robust propensity to invest even more in innovation than predicted by standard theory. The data suggest that this behavior results from the intention not to be outperformed by one's peers.
- Published
- 2015