Creative Class Competition and Innovation in the Absence of patent Protection

Abstract

Recently, Batabyal and Yoo (2018) have analyzed Schumpeterian competition in a region that is creative a la Richard Florida and where the creative class is made up of existing and candidate entrepreneurs. These researchers assume that an existing entrepreneur has a fully enforced patent on the inputs or machines that he has produced. We dispense with this assumption and study a scenario in which there is no patent protection for the representative existing entrepreneur (REE). This REE can undertake two possible types of innovation at the same cost. The first (second) type of innovation is general (specific) and hence can (cannot) be copied by the so called candidate entrepreneurs. In this setting, we perform two tasks. First, we show that although the REE will never undertake the general innovation, he may undertake the specific innovation. Second, we point out that even though the general innovation is not undertaken, the value to the creative region from the general innovation exceeds that from the specific innovation.