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Technology entry in the presence of patent thickets

Bronwyn H. Hall, Christian Helmers and Georg von Graevenitz
IFS Working Paper W16/02

We analyze the effect of patent thickets on entry into technology areas by firms in the UK. We present a model that describes incentives to enter technology areas characterized by varying technological opportunity, complexity of technology, and the potential for hold‐up in patent thickets. We show empirically that our measure of patent thickets is associated with a reduction of first time patenting in a given technology area controlling for the level of technological complexity and opportunity. Technological areas characterized by more technological complexity and opportunity, in contrast, see more entry. Our evidence indicates that patent thickets raise entry costs, which leads to
less entry into technologies regardless of a firm’s size.

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