Innovation Economics

(5 Credit Hours) · Undergraduate

Innovation is an economic problem because it depends on the active choices of agents who respond to incentives. It is well established now that innovation is central to economic growth and corporate performance. It is widely believed that in the long-run companies can only survive by continuous innovation. Understanding the interaction between innovation and different market structures, effects of public policy, and patent data and metrics is a key asset in any business. Yet innovation is a complex phenomenon that is associated with many inter-related market failures, and gives rise to fundamental theoretical and practical problems and questions: i) What is the role of patents and other forms of protection of intellectual property in promoting innovation? ii) What is the link between innovation and competition? Is a very tough competitive environment bad for innovation? Or is competition just what firms need to spur them on to innovate? iii) Many governments now promote cooperation between firms as a way of generating more innovation. Is this desirable? iv) What are the economic merits of prize contests in spurring innovation to solve problems like climate change? These issues are not just of academic interest and importance but of very real practical and policy interest. If we are to make progress on these issues, we need clear and rigorous analysis.