Patent Renewals and R&D Incentives

Posted: 22 Feb 1999

See all articles by Francesca Cornelli

Francesca Cornelli

London Business School; Centre for Economic Policy Research (CEPR)

Mark A. Schankerman

London School of Economics and Political Science; Centre for Economic Policy Research (CEPR)

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In a model with moral hazard and asymmetric information, we show that it can be welfare improving to differentiate patent lives when firms have different R&D productivities. A uniform patent life provides too much R&D incentive to low-productivity firms and too little to high-productivity ones. The optimally differentiated patent scheme can be implemented through a menu of patent lives (or renewals) and associated fees. We characterize the optimal mechanism and use simulation analysis to compare it with existing patent renewal systems and to illustrate the potential welfare gains from the optimal policy.

JEL Classification: O31, O32, O34

Suggested Citation

Cornelli, Francesca and Schankerman, Mark A., Patent Renewals and R&D Incentives. Available at SSRN:

Francesca Cornelli

London Business School ( email )

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Centre for Economic Policy Research (CEPR)

United Kingdom

Mark A. Schankerman (Contact Author)

London School of Economics and Political Science ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7518 (Phone)
+44 20 7831 1840 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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