Friday, February 6, 3:00 p.m.
Center for Social Complexity Suite
Research Hall, Third Floor

Percolating Patents: Balancing the Effects of Patents on Innovation

Nathan Goldschlag, PhD Candidate
George Mason University

ABSTRACT: A model of the innovation process is proposed as a method of understanding the contrasting effects of patents in both promoting and stifling innovative search. Traditional economic models of the innovation process and patenting struggle to capture the interdependence of different types of technologies and the path dependence of innovative search. This research addresses this gap by developing an agent-based computational model that directly incorporates path dependence, localized search, uncertainty, and the interdependence of technological innovations. The model is capable of replicating several stylized facts including the skewed distribution of innovation value as well as the temporal clustering of radical innovations. Simulation results are used to investigate how monopoly power, complexity of the technology space, patent breadth, and patent duration affect innovative activity. The results suggest that monopoly power in varying degrees can substitute for patent protection. Overall, patents are likely to reduce innovative performance by reducing the number of highly valued innovations firms create. Patents do however increase the number of innovations firms make as firms are forced to invent around and spend time churning through lower valued areas of the technology space. Finally, given that patents are enforced, patent radius has a large negative impact on innovative performance while patent duration has a slightly positive impact.