An Optimizing Model of R&D, Spillovers, and Intellectual Property Rights

This paper develops a microeconomic model of private R&D and studies the effects of intellectual property rights (IPR) on equilibrium R&D. IPR has two opposing effects: on the one hand it enables a firm to better appropriate the returns to R&D; on the other hand, it has the potential to impede the flow of R&D knowledge spillovers among firms. Spillovers may be impeded if it is necessary for users to practice R&D in order to benefit from R&D externalities.