Essays on the economics of innovation and intellectual property rights.

Summary Innovation has received much attention from economists. As a result, intellectual property rights (IPRs), which allow the innovator, in order to recoup his R&D cost, to charge a monopoly price, have gained wide acceptance. Balancing the dynamic and static efficiency of IP is a major concern for policy makers. Many studies have addressed this issue, but have not reached a consensus. In the first chapter, I attempt to answer the following question: Should additional market exclusivity be granted for new innovators in the pharmaceutical industry? My results show that the value gained by a new innovation outweighs the loss of market exclusivity, but with a minor benefit. In chapter two (with Roberta Dessi), we turn our attention to the financial aspects of innovative activities. We review the empirical evidence on the impact of venture capital on innovation. We propose a simplified theoretical model to illuminate potential endogeneity signals to identify how venture capital influences innovation. In Chapter Three (with Margaret K. Kyle), we explore the potential effects of intellectual property rights and research exemptions on cumulative advances in drug development. Our results show that patent protection tends to promote innovative activities and facilitate post-launch drug trials. Research exemptions are found to be associated with a decrease in follow-up innovation activities. Each of these three chapters stands alone. Chapters one and three investigate the rationale for granting intellectual property rights to the innovator. Chapter two examines the financial arrangements for innovation activities.