Intellectual property rights, licensing, and innovation in an endogenous product-cycle model

We develop a dynamic general-equilibrium model of the product cycle to study the effects of stronger intellectual property rights (IPRs) in the South on the incentives of firms in the North to innovate and to License advanced technologies. Innovation and licensing are random processes requiring resources. Stronger IPRs increase the licensor's share of rents and reduce the costs of licensing contracts. Thus, the returns to both licensing and innovation would rise while additional resources would be available for R&D. In consequence, innovation and technology transfer would rise. However, the effect of stronger IPRs on relative wages between regions is ambiguous. (C) 2001 Elsevier Science B.V. AU rights reserved.