Category: Innovation
Facebook founder Eduardo Saverin has decided to renounce his US citizenship. A bunch of self righteous politicians are going to complain that Eduardo has a duty to stay in the US and that he is being unpatriotic by leaving. These same politicians ignore the Constitution, regularly trample the Bill of Rights, and tell us that people don’t create things, society does. These politicians are immoral hypocrites. By the way the IRS will be demanding that Mr. Saverin pay an exit tax that could amount to millions of dollars – only a cynically corrupt government would have an exit tax for it citizens.
Many people have speculated that Saverin is making this move for tax reasons, but he has lived in Singapore for years. Singapore is one of the few countries that understands the value of inventors, entrepreneurs, and engineers/scientists. In the US we keep weakening out patent system, making it harder to raise capital, and then taxing startups to death. We have the highest corporate tax rate in the industrialized world. Do the politicians blame themselves for this exodus of talent from the US – NO.
I have written on this subject several times – see the posts below.
Perhaps the UN didn’t get the message, however you would expect with all those brilliant climate scientists they would have – you can’t build a perpetual motion machine. According to Fox News the UN has put out a report on how it is going to create a “sustainable” economy by spending trillions of your dollars. A sustainable economy is one in which resources are infinitely reusable and there is no adverse byproducts. It appears that the brilliant or perhaps mad scientists at the UN didn’t take thermodynamics, or they missed the lecture on entropy. Entropy explains why you cannot build a perpetual motion machine. It explains that every process results at least in waste heat, which means any 
process that uses energy cannot be 100% efficient and the economy uses energy. For more information see Sustainability isn’t Sustainable. The UN should quit tilting at windmills and perhaps the US should quit sustaining the UN.
PS: The UN also did not seem to get the memo from Japan’s Space program that Industrialized countries are net carbon sequesters. The Third World owes us carbon reparations.
Twitter posted their Innovators Patent Agreement (IPA) https://github.com/twitter/innovators-patent-agreement/blob/master/innovators-patent-agreement.md with much ballyhoo yesterday. Despite the claim that Twitter will only assert patents defensively, part 2(b) of the IPA allows Twitter to assert patents against anyone who has asserted their patents. This will only exclude a very few companies, mainly startups. Twitter’s stated goal is to promote innovation, but the real result if Twitter is successful will be that companies will rely on Trade Secrets. Trade secrets decrease innovation, because the information is not shared. Inventors cannot build on the work of previous inventors and they are more likely to waste resources rediscovering other people’s work (reinventing the wheel). History clearly shows that when a country relies on trade secrets instead of patents, innovation is impeded. Those countries with weak or nonexistent patent systems are not innovators and their people live on the edge of starvation.
Mark Cuban has been famous for criticizing intellectual property and particularly patents. According to IPBiz he stated on his blog that,
Pick any country that is currently doing well, China is a perfect example. In China the Intellectual Property Laws are so weak that someone thought it was a good idea to completely replicate Apple retail stores. Compare their economy to ours. As much as I hate to compare other economies to ours, it’s worth taking a look .
He has also criticized companies that enforce their patent rights. But now Cuban has bought into a company, Vringo, that acquired Lycos’ patent portfolio and is now enforcing those patents, according to an excellent post on GametimeIP. Vringo could be described as a Mythical Patent Creature (I stole this line from Patrick at Gametime IP).
This is not the full extent of Mr. Cuban’s hypocrisy. I am sure that he has made a fortune on the IP rights he has in the Mavericks (Just think of the money we could make by rebroadcasting Mavericks games, if we didn’t have to pay for Cuban’s IP). In addition, his argument that the countries that are doing well have weak IP rights is clearly nonsense. Is North Korea doing well? The start of China’s economic growth corresponds to their recognition of property rights including IP rights. They didn’t have any IP rights during “The Great Leap Forward” when millions of people starved to death. The current economic downturn in the US is not because our patent rights are too strong, but because they are too weak. Patents are property rights and when patents are under attack you can bet that all property rights are under attack. Clearly, the communist we have in the White House is not interested in strong property rights, but in fairness the Bush Administration was only ambivalent about property rights.
The USA now has the highest corporate tax rate in the World. The sad point is when you add in State corporate taxes, the US was already had the highest corporate tax rate in the World. This will hurt the US’s innovation, fewer people will invest in startups and fewer people will invest in new technologies.
The Marxists in the Administration will argue that this has no effect on whether companies invest in the US, or hire employees here, or whether people decide to start businesses in the US. Of course, they have absolutely no evidence to back up their assertion. In fact, all the evidence is against them. But they will argue that we have to “invest” in our future. This comes from an administration that believes
CONSUMPTION CREATES WEALTH.
No this is not a joke, but exactly (see Food Stamps) what the so called economists advising this administration believe. Compared to these economists, the FLAT EARTH SOCIETY seems like they are part of the Enlightenment. This doublethink is compounded by the idea that we are investing by giving money to Solyndra and other companies organized by Obama political cronies. These “investments” are political investments by Obama, not investments in the US’s future. Real investment by the government would be reducing the size and regulatory burden of the Government, see Austerity: Why it is Key for Both Short Term and Long Term Economic Growth.
Statist from both political parties will argue that the effective tax rate of many corporations is much lower than the nominal tax rate. They neglect to mention that this only applies to large multinational companies. These large multinational are able to escape the high corporate tax rate, because they have subsidiaries around the world and can shift income and production to low tax countries. Raising their tax rate, just means they will move more and more of their production and income outside the US. Large multinational companies are net job destroyers according to the Kauffman Foundation, so they should not be our focus. Net new jobs and economic growth come from startups. US startups do pay close to the nominal corporate tax rate and these draconian tax rates along with failure to provide an effective patent system, and regulations are killing our economy.
For a great article on this point see America has the Highest Taxes in the World.
The Senate passed the JOBS (Jumpstart Our Business Startups) Act, H.R. 3606 and President Obama is likely to sign it. The goal of the legislation is to reduce some of the regulatory burdens in raising capital for startups. The Act exempts small firms from Section 404 of the Sarbanes-Oxley Act for up to five years according to Wikipedia. It also includes some of the crowdfunding ideas of HR 2930. This legislation is a positive step in the right direction. Unfortunately, it is a 
pebble in Sea of laws, regulations, and taxes strangling technology startups in the US. My guess is that the reason this legislation is passing has little to do with what is good for the country, but what is good for Wall Street banks.
In my book The Decline and Fall of the American Entrepreneur I show that every academic study of the effectiveness of our Securities Laws shows that they have been either totally ineffective at protecting investors or worse counterproductive. The real answer to the lack of funding for start-ups would be to repeal all Securities Laws and Regulations except the common law requirements under contract and tort law.
Forbes magazine has an excellent article that provides the real facts behind the so called patent litigation explosion entitled “No, the Patent System Is Not Broken.” The article explains:
“The truth is that today’s patent litigation rate is less than half what it was in the mid-nineteenth century, a period widely recognized as the golden age of American innovation.”
The article puts today’s patent litigation rates in context.
According to Lex Machina’s authoritative “Database of U.S. Patent Litigation 2011,” the number of patent suits filed between 2001 and 2010 has held steady at less than 3,000 per year. Only about a hundred of these cases actually went to trial each year
To put it in even broader historical context, the estimated 100 patent suits currently filed in the smartphone industry is actually less than one-fifth the number of suits filed during the first “Telephone Wars” of Alexander Graham Bell’s time. Back then, the American Bell Telephone Company and its successor, AT&T, litigated a whopping 587 patent cases alone.
Perhaps even more importantly the article explains that a strong patent system creates a division of labor between inventors and manufacturers. According to Adam Smith the division of labor is key to increasing our wealth.
“The growth of market trade in patents raised the returns to invention and encouraged a division of labor whereby technologically-creative individuals increasingly specialized in their comparative advantage—invention,” observed Lamoreaux and Sokoloff. “It was the expanded opportunities to trade in patented technologies that enabled the independent inventors of this golden age to flourish—and that stimulated the growth of inventive activity more generally.”
By 1865 the per capita patenting rate in the U.S. was triple that of Britain, and the vast majority of those citizen-inventors were what we now call “non-practicing entities,” or NPEs, who licensed their patents to others to commercialize into new products. Indeed, patent and legal records from the nineteenth century indicate that more than two-thirds of the 160 so-called “great inventors” of the Industrial Revolution, including Thomas Edison, were NPEs.
Please check out the full article at:
The CATO Institute are reiterating the findings of the flawed paper The Private and Social Costs of Patent Trolls , Boston University School of Law Working Paper No. 11-45, by James E. Bessen, Michael J. Meurer, and Jennifer Laurissa Ford. This paper looks at lawsuits filed by NPE (Non-Practicing Entities) and the subsequent drop in the stock price of the company being sued. The paper suggests that this loss of wealth is all “deadweight” loss, since little of the money ends up with the original inventors of the technology. This last part is an intellectually dishonest slight of hand. The authors make no attempt to determine if the cases are meritorious. If the firms are infringing a valid patent, then the filing of the lawsuit represent the cost to society of deterring the theft of inventions. This cost discourages further theft by companies. If half the patent lawsuits (by cost) are meritorious then the net cost of these lawsuits is zero. Unless you assume that the cost of protecting property rights has no value, which I am afraid is the ultimate problem with anti-reason people at Reason Magazine and CATO. Neither of these organizations seems to understand property rights.
This lack of understanding of property rights causes multiple errors in both the paper and CATO’s and Reason’s analysis of this issue. For instance, once you understand that patents are property rights you understand the purchase of patents by investors is not different that the purchase of a building from the builder. The profits by the subsequent purchaser of the building are not “DEAD WEIGHT” costs and neither would a lawsuit by the purchaser to demand rent for someone squatting in their building. When the (paying) occupancy rate for buildings is high this encourages the building of new structures. The same is true for patents – when owners of patents receive good returns on their assets then inventors create more of these assets.
Unfortunately, the CATO Institute has become hopelessly lost on the issue of property rights. They have adopted the Utilitarian point of view that property rights are just an efficient way of allocating scarce resources. Professor Adam Mossoff has commented on this nonsense. Mossoff states that Jeremy Bentham’s ideas are at the root of Libertarian’s attack on IP. Bentham basic philosophy was Utilitarianism – the greatest good for the greatest number. Bentham stated that the reason for property rights was because of scarcity and conflict resolution not natural rights. Mossoff then points out that the followers of Bentham argue that there is no conflict between people using the same ideas like there is with land. Ideas can be copied and used endlessly. This argument fails for because there is a conflict when a physical embodiment of the idea (invention) is created. The copier has clearly limited the return for the inventor and patent law only prohibits the physical embodiment. I discuss the fallacies behind the scarcity theory of property at my post Scarcity: Does it Prove Intellectual Property is Unjustified and Scarcity -2 and Scarcity -3. Mossoff points out that this is the philosophical point of view used by the Cato Institute and the Von Mises Institute to attack patents (IP).
Utilitarianism’s “greatest good for the greatest number” always leads to totalitarianism. It also never leads to the purported goal. The reason for this is that utilitarianism is merely a justification for short term actions. Once something has been produced, it always looks like the greatest good is to redistribute the creation. However, this is clearly only true in the short term. In the long term it is clear that this always destroys the economy. This is the theory behind the USSR, North Korea, and all socialist states. As Ayn Rand pointed out you only need open your eyes to see that these countries do not produce the greatest good for the greatest number. This is because stealing the product of one’s mind (mental labor is labor) is no different than banning free speech. It stifles the mind, which source of all economic progress (values).
The CATO Institute’s article is under the header “Regulation.” This again demonstrates that the CATO Institute does not know the difference between property rights and regulations. Here are three easy questions for Libertarians, Socialists, and Economists to determine if a right is a monopoly (rent seeking) or a property right.
1) Does the right arise because the person created something?
2) If someone else was the creator would they have received the right in the creation?
3) Is the right freely alienable?
Patents meet all the tests of property rights. They are not a regulation. Enforcing property rights does not result in dead weight costs.
Another great article on this issue can be found at Gametimeip entitled Myopic Patent Cynicism.
The arrest of Kim Dotcom and the raiding of Megaupload plays into the SOPA & PIPA argument about stopping online piracy. Goggle & Wikipedia just did a blackout to protest these pieces of legislation. The problem with this whole area of legislation is that it is dominated by special interests instead of based on fundamental understandings of property rights and the due procedure. The two groups doing battle are Hollywood and the content providers against Google/Wikipedia and the free internet nuts. The legislation was written by Hollywood and basically allows the government to take down a website without any due process. It allows “in rem” suits in which the website is the defendant instead of the owner – essentially making it a one-sided hearing. Hollywood wants more tools to stop online theft. However, Hollywood has gotten a number of laws related to this problem passed already. My other complaint is that Hollywood is great at publicizing its plight, but the more economically important theft going on is the theft of our technology. In that case we have a government website that tells people exactly how to steal out technology – it’s the USPTO website. Google and friends don’t have much of a moral ground to stand on, since they have been happy to steal other people’s intellectual property. Google pushed for laws to weaken patents (property rights) and has been unwilling to pay patent holders for the technology they have used in their Android phones. In addition, their heavy handed approach to other people’s copyrights in their Google Books Library Project shows they are not above stealing other people’s intellectual property. Google’s founders are quite happy to manipulate the laws of this country for their own benefit. For instance, they invested in several solar energy companies and were quite happy to take tax dollars to bail themselves out of their failed investments. (See Throw Them All Out, by Peter Schweizer). Unfortunately, this whole area is just power politics at its worst.
According to an article, entitled “House Passes First Crowdfunding Legislation” the House has passed a bill modifying the securities law to allow “crowdfunding.” The proposed legislation appears to be a fairly well crafted piece of legislation, which is quite unique for Congress lately. The bill is less than 2000 words and does not appear to have any special interest provisions. The Bill would allow companies to raise up to $1M online within a year without audited financial statements and up to $2M online with audited financial statements. Another positive of the Bill is that it does not require investors to be accredited to invest. However, it requires that no one investor contribute more than $10k or 10% of their income, whichever is less. The Bill appears to require a number of statutory warnings about how risky it is invest in the company. It makes it difficult for an investor to sell their stake in the company within a year of the purchase. It also does not require a broker to be licensed with the SEC to sell shares in the company. However, it does require someone acting as a broker to provide information to the SEC. The SEC could expand these requirements under its rule making authority. In general, I consider this good news for start-ups.
The downside of this legislation is that it is a band aid to fix the problems with our Securities Laws. Every academic study of the effectiveness of our Securities Laws shows that they have been either totally ineffective at protecting investors or worse counterproductive. The real answer to the lack of funding for start-ups would be to repeal all Securities Laws and Regulations except the common law requirements under contract and tort law.
It Is Dangerous to Be Right When the Government Is Wrong: The Case for Personal Freedom, by Andrew P. Napolitano
Judge Napolitano has written an excellent book on Natural Law from the perspective of an attorney. He attacks legal 
Positivists, who believe the law is whatever the government says it is. He points out the moral bankruptcy of Positivists by pointing out that they have no logical basis to be against Hitler’s final solution of wiping out all Jews – since it was a validly passed law. He also rejects the non-sense of “majority rule” or Democracy.
He explains that Natural Law is like science. He states:
Only man-made theories for what those rules are and how the operate may change.
However, without an explanation or understanding, those rules remain just as “true”: Penicillin will combat certain infections, and gravity will always pull things toward the center of the Earth, regardless of whether or not we understand how.
He also states something that will not sit well with conservatives:
Truisms reject moral relativism, and American Exceptionalism. They compel and understanding of the laws of nature that animate and regulate all human beings at all times, in all places, and under all circumstances. And truisms equal freedom.
The book starts off with the Declaration of Independents. It moves onto eminent domain issues where the judge has a number of illuminating points. I particularly liked the freedom of association chapter. Napolitano I think is one of the few people to write about this issue. I also found the right to petition chapter illuminating. I believe that only someone with Judge Napolitano’s legal background could have done this chapter justice. His chapter on the growth of the Defense Industry was illuminating. While I did not agree with all his points, he makes it clear that the Defense Industry has grown completely out of control. According to the Judge the US military is in over 130 countries. The quote from Fredrick the Great comes to mind “in trying to defend everything he defended nothing.” The US military has become just another welfare/crony capitalism project. The military will complain that defense spending as a percentage of GDP is less than it was during the Korean War. However, we did not have the Department of Homeland Security, the Department of Energy, the Border Patrol, etc, which are all really part of our defense spending at the time of the Korean War.
Unfortunately, the book is marred by two problems. I am in complete agreement with the Judge’s emphasis on Natural Law, but he defines it in terms of “essential yearnings.” Someone might have an essential yearning to torture people or kill them. That does not make it a natural right. It is enough to state that people have ownership of their body. The rest of Natural Law and Natural Rights flows from this simple concept. Once I own myself, I clearly own the product of my labor which leads to all of property law, including patents. Criminal law comes from violating my rights in my body or in my property. The “essential yearnings” adds nothing to the concept of Natural Law and Natural Rights.
The second problem with the book is Judge Napolitano’s analysis of fractional reserve banking. The Judge and some Austrian economists incorrectly state that fractional reserve banking allows banks to create money out of nothing. A fractional reserve bank is a bank that lends out part of its depositors money. Fractional reserve banking is how all modern banks (since at least 1750s) operate. Wikipedia defines a Fractional-reserve banking as a type of banking whereby the bank does not retain all of a customer’s deposits within the bank. Funds received by the bank are generally on-loan to other customers. This means that available funds (called bank reserves) are only a fraction (called the reserve ratio) of the quantity of deposits at the bank. As most bank deposits are treated as money in their own right, fractional reserve banking increases the money supply, and banks are said to create money.
The history of fractional reserve banking starts with the concept of an exchange bank. I explain in my book, The Decline and Fall of the America Entrepreneur: How Little Known Laws and Regulations are Killing Innovation:
Modern banking started in the early 1600s with the Bank of Amsterdam. Merchants could deposit coins with the Bank of Amsterdam and use this account to pay for transactions. Using checks, a merchant’s account was debited and another merchant’s account was credited. This meant that coins did not have to be transported from one merchant to another with the attendant risk of theft and loss or the cost of transportation. The Bank of Amsterdam was just an exchange bank that facilitated transactions between merchants. Next came the Swedish Riksbank established in 1656. The Riksbank was not only an exchange bank, it also lent money making it the first modern fractional reserve bank. Fractional reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand. Commonly, loans are made against collateral such as land or jewelry. … Some people believe fractional reserve banking creates money out of thin air, but what really happens was the money for these loans were backed by some collateral other than coins or bullion. The downside of other types of collateral is they are not as liquid as species (coins, bullion). As a result, if large numbers of customers of a fractional reserve bank wanted species (currency) at the same time, the bank would not able to fulfill all its customer’s demands. This is a classic run on a bank. A run on a bank is a cash flow issue. A sound bank may have plenty of collateral and performing loans, but if most of its customers demand species at the same time it will not be able to fulfill these requests. Fractional reserve banks free up capital from low performing assets so that they can be invested in higher performing assets. For example, if you owned a large tract of ranching land that was not highly profitable but represented a large amount of capital and you want to invest in an oil well, without fractional reserve banking you would have to sell some of the land in order to invest. With fractional reserve banking you could convert your land into a generally accepted form of money, by pledging your land as collateral to a bank for a loan. In the modern world, the loan to you is just a computer entry in your bank account.
It is clear from history that fractional reserve banks are not some sort of government institution, like the Federal Reserve. Without fractional reserve banking it is would be very difficult to securitize (Collateralize) many assets, such as houses and land. This would significantly impede the economic growth of a country. Logically if you are against fractional reserve banking you should be against a stock market. Both are just a way of securitizing assets. The stock of paper money act as a claim against various assets and/or future earnings.
The Heritage Foundation has just released its Index of Economic Freedom. The US has fallen to 10th place in the rankings. It appears the President Obama’s idea of fundamentally remaking the US is to no longer have the US the LAND OF THE FREE.
Fixing our economy and our unemployment problem is a straight forward case of increasing our ranking of economic freedom. The Heritage Foundation put out an excellent video explaining the results of a declining level of economic freedom.
The passage of the America Invents Act is part and parcel of losing our economic freedom. It had a number of special provisions for Wall Street and big Pharmaceutical companies. It weakened the rights of startups and individuals in their inventions. This has made it more difficult for inventors and startups to raise capital. Technology startups are the driving force behind new jobs and high quality jobs.
This is a multi-part post on the science of economic growth. Standard economic theory has failed miserably to define the source of economic growth, which means it is impossible for it to provide rational policies to restore economic growth. This series of posts defines a scientific theory of the source of economic growth.
Natural Laws of Invention
With this in mind I propose the following laws of invention.
Conservation Law of Invention:
All inventions are combinations of existing/known elements.
Conservation of matter (and energy) means that you cannot create something from nothing. As a result, all inventions must be a combination of existing or known elements. For those people who want to point to Americium (94), Curium (96), Berkelium (97), all these chemical elements are made of protons, neutrons, and electrons and all of these were existing elements.
Causality Law of Invention:
Invention precedes production, production precedes consumption.
In order to consume an item it first has to be produced. Production may just be the act of finding food for a hunter gatherer, but this has to be done before it can be consumed. With the possible exception of some very simple things, mother’s milk and air for instance, things have to be invented before they can be produced.
Set Law of Invention:
The number of potential inventions is infinite.
The total number of inventions may be limited by the total mass and energy of the universe and the laws of entropy that limit how many elements can be combined. However, physics is pretty ambiguous on this point. There may be multiple universes, there may exist energy and matter outside of our event horizon.
There are essentially an unlimited number of potential inventions. Paul Romer, a professor of economics at Stanford uses the following example to illustrate this point:
On any conceivable horizon — I’ll say until about 5 billion years from now, when the sun explodes — we’re not going to run out of discoveries. Just ask how many things we could make by taking the elements from the periodic table and mixing them together. There’s a simple mathematical calculation: It’s 10 followed by 30 zeros. In contrast, 10 followed by 19 zeros is about how much time has elapsed since the universe was created.[1]
Someone might object that Paul Romer has overstated the number of possible chemical inventions, since not all elements are able to chemically bind to each other. On the other hand, this calculation only includes one of each element. Some of our most important chemical compounds contain long chains of carbon and silicon atoms. In addition, the elements can bond to each other in multiple ways, ionic bonds, covalent bonds, polar covalent bonds and hydrogen bonds. Elements may also have double, triple and quadruple bonds. When you add in all these variations, Dr. Romer probably underestimated the number of possible chemical inventions. This calculation is only for chemistry. When you consider computer networks or electronic circuits with millions of transistors or nodes the number of different possible connection is n(n-1)/2 or easily equal to the number of combinations described for chemistry. This does not begin to name all the possible number of inventions. Previous inventions often are the basis of future inventions. As a result, the development of an invention acts as node for additional inventions and increases the potential number of inventions rather than reducing the potential number of inventions.
Another example that Romer uses to illustrate the unlimited number of possible combinations is all the possible bitstreams you can turn into a CD-ROM. The number is something in the range of 10 to the power of 1 billion, which virtually ensures that we will never run out of software to discover. He notes that there is not enough mass in the universe to make that number of CDs.[2]
Rate Law of Invention:
The rate of invention is dependent on the number of inventors, the size of the set of elements the inventors can access, and the size of the set of goals.
Inventions are combinations of elements and connections, but an individual has to put together these combinations. If more individuals are involved in the process of trying out combinations, then there is a greater likelihood they will find a useful combination or invention. In a rough analogy, the more samples or children in an genetic algorithm, assuming they are diverse, the more likely or sooner you will find an acceptable solution. Silicon Valleyoften creates many companies in a particular space, which function like a large population in a genetic algorithm, and results in an optimized solution (company) more quickly than only having a few companies in the space. Individuals create these sample combinations and test them against a selection criteria. If more people are creating these samples then you increase your probability of inventing a useful product of service. The corollary is that you have more “failures” than you have success.
A successful solution to a particular selection criteria or fitness criteria has an increased probability if the creators (inventors) have access to the complete set of elements available in the world. When the inventors are limited in their selection or application of existing elements, then it reduces the potential number of combinations. It is possible in this case, that many solutions meeting the fitness criteria will not be part of the search space. This deceases the probability of finding a solution. When inventors’ freedom of action is restricted it will decrease their chance of creating something useful.
Inventors as a group will be more successful if each individual inventor is allowed the freedom to pursue their own invention goal. There are at least two problems with restricting the goals of inventions. One, the individual’s talents and interests may fall into a forbidden area. Two, unexpected results may fall into a forbidden area and therefore not be pursued.
As a result, we see that freedom fosters invention. This is consistent with both our academic institutions’ policies and with a free market. Invention is not encouraged by plagiarism. Plagiarism results in wasted resources, because the plagiarizer is reinventing the wheel and they erode the valve of the original inventor’s work. This is one of the reasons for a patent system. We do not want people to plagiarize, but inventing around a patent which creates a diversity of inventions is good. The inventor is the first person to create a new technology because they add to the store of human knowledge. Even innocent copycats do not add to the store of human knowledge.
Note that freedom as used herein applies to everyone. Forcing someone to support your inventive activities, restricts their freedom.
A corollary is that invention is fostered by wide dissemination of the information on how to build earlier inventions. Without this dissemination, individuals will waste time recreating technologies. This is why patent systems require a description of how to practice the invention.
Commons Law of Invention:
Inventions are not subject to overuse. The creation of inventions is subject to under investment without property rights in inventions. The diffusion of inventions is subject to under investment without property rights in inventions.
Although there are unlimited number of potential inventions, this does not mean that creating them is free. The U.S.spends over $300 billion a year on research and development to discover inventions.[3] Just like real property, conceiving inventions takes scarce resources. The number of researchers, research facilities, and research equipment are all limited. Each researcher’s ability to pursue various inventions and discoveries is limited. It will always cost less for a copier to produce existing items than create their own inventions without property rights in inventions. This will result in an under investment in the creation of inventions.
Once an invention or discovery is made it still costs considerable resources to distribute the invention. For instance, scientific principles are not subject to intellectual property rights and therefore can be freely disseminated. Calculus was discovered over 300 years ago and is not the subject of intellectual property rights. Despite this, only a small percentage of the population understands it even in the most advanced economies. Those people that do understand calculus generally paid an instructor to learn this area of math even though books on the subject can be reviewed for free at many libraries. Almost everything a student learns through formal education, even in graduate school, is information that is readily available. Even if the text book is copyrighted, the information is usually available in a non-copyrighted form or available for free from a library. In spite of this, theU.S.spends over $500 billion a year on all forms of education. Clearly, adopting and distribution ideas including inventions is not free.
According to venture capitalists, most start-ups will spend 2-10 times the amount on marketing their inventions than on developing them. If the distribution of ideas was free, not subject to scarcity, this would clearly be unnecessary.
University professors, doctors, lawyers, engineers, judges, marketers, sales people and computer scientists are mainly in the business of distributing or implementing known information. Most of these professionals would be unnecessary if distributing information was frictionless. Distributing information is extremely costly, especially new information.
Without property rights in inventions, most people and institutions will not spend the additional money required to create and distribute inventions. This will result in an under investment in invention.
Income Law of Inventions:
The per capita income of a large group of people can only increase over the long term if their level of technology increases.
Real per capita increases in income can only be the result of inventions. Adding capital without any inventions associated with the capital will result in elevating every worker to a certain efficiency level, however never above that level. Once every worker has the all the capital resources they can use in their job they have hit a maximum output without inventions.
Conclusion
Every living organism has to overcome entropy to stay alive. We defined entropy as biological entropy as opposed to absolute or energy entropy, because living organisms cannot necessarily extract all the energy shown by absolute entropy. Maximum entropy for an organism was defined as when death occurs. This setups up the competition between organisms and between species to extract energy to stay alive or the process of evolution. The unique feature of man is that he invents new technologies to overcome biological entropy. All economic growth is the result of increasing levels of technology. Biological entropy implies diminishing returns. In a technologically stagnant world, diminishing returns ensures that humans will be stuck or fall back into the Malthusian Trap. A technologically dynamic world allows humans to escape the Malthusian Trap permanently and have ever increasing standards of living. This economic growth is an endogenous process and property rights in inventions has been the major catalyst for increasing rates of invention and increases in our level of technology. Perfect competition does not provide the resources or justification to invest in new technologies and is synonymous with a technological stagnant world. The Industrial Revolution was an explosion in new technologies and happened first in England and was quickly followed by the United States because these countries provided the first property rights for inventions for large groups of people. There are a number of natural laws of invention and these can be helpful guides in determining if an economic policy will result in economic growth.
[1] Bailey, Ronald, “Post-Scarcity Prophet: Economist Paul Romer on growth, technological change, and an unlimited human future”, Reason, December 2001.
[2] Kelly, Kevin, “Paul Romer: The Economics of Ideas”, http://www.versaggi.net/ecommerce/articles/romer-econideas.htm, viewed July 4, 2009.
[3] Kao, John, Innovation Nation: How America is losing its Innovation Edge, Why it Matter, and What We Can Do to Get it Back, Free Press, 2007, p. 39.
This is a multi-part post on the science of economic growth. Standard economic theory has failed miserably to define the source of economic growth, which means it is impossible for it to provide rational policies to restore economic growth. This series of posts defines a scientific theory of the source of economic growth.
Perfect Competition vs. Monopolistic Competition
There has been a fear that technological progress, particularly when tied to a patent system, leads to monopolistic competition. Monopolistic competition is supposed to be incompatible with Adam Smith’s invisible hand or perfect competition. In perfect competition, no one producer or consumer has the ability to affect the market price and all producers and consumers compete for a homogenous product, driving down the cost of the product. Commonly, individuals say this process is what makes us all wealthy in a free market economy. Interestingly, Adam Smith’s example of the pin factory is supposed to describe the beginnings of monopolistic competition. The specialization described by Smith is alleged to lead to greater scales of economy, which leads to more specialization firmly entrenching incumbent firms. However, monopolistic competition is supposedly bad causing inefficiency resulting from a company’s ability to charge a price above its marginal cost.
This theory is at odds with the first rule in business – find a competitive advantage if you want to survive and prosper. Any business that can only price its goods at its marginal cost is not worth investing in; since it will not provide a return on investment. How can we reconcile this conundrum?
As proven earlier, the way in which we overcome entropy is by inventing. While an invention may be used to produce an existing good at a lower price, it may also be used to create a new good to meet an unfilled demand. Even if the invention is a way to make an existing good cheaper, the goal of the businessman is to maximize his profits. In order to do this, he will have to charge a price above his marginal cost but below the price of his competitors. The potential profits will be used by the inventor to attract or justify investment in the invention. Without this investment, the invention will never be commercialized and the consumer will potentially be worse off, as will the inventor. If the inventor’s idea can be easily copied, it might not attract investment, therefore, it will not be commercialized, to the detriment of both the inventor and consumers.
Perfect competition is the state at which it makes no sense to invest in any business, let alone new inventions. Perfect competition in any economy leads to a technologically stagnant world and decline in real per capita incomes until humans are back in the Malthusian Trap. It is the enemy of innovation, wealth, and human happiness.
Does this mean we want monopolistic competition? It depends. If the monopolistic competition is the result of property rights (including patents), then yes we do want monopolistic competition. Only with the prospect of significant returns will people invest in developing and disseminating new technologies. Without this incentive, entropy will take over and we will regress economically.
If the monopolistic competition is the result of government imposed restrictions to the market, then the answer is no. How do we tell the difference between government protecting property rights and arbitrary barriers to the marketplace? After all, a number of influential people, including Thomas Jefferson, have suggested that patents are a government granted monopoly and not a property right.[1] In order to differentiate between property rights and arbitrary government grants, we need a definition of property rights and an understanding of their characteristics.
Property rights are a legal recognition of creation. The first owner of anything is the creator. This was explained somewhat inartfully by John Locke, as if you mix your labor with a natural resource it becomes your property because you own your labor. Property rights are also freely alienable, meaning the owner has a right to sell, lease, subdivide, grant easements, etc. according to the owner’s needs and desires, without government approval. Recording a transfer is not government approval, instead it is a process whereby government will enforce these private agreements. A number of government regulations have impeded the right of alienation even on land, but in general, property in land is still alienable. There are three simple questions to determine if a government action is a property right or a rent-seeking regulation.
1) Does the right arise because the person created something?
2) If someone else was the creator, would they have received the right in the creation?
This ensures that the right does not arise from political favoritism.
3) Is the right freely alienable?
If the answer to all three questions is yes, then the grant in question is a property right. Patents and intellectual property rights arise because someone created something. If another person had created the same thing, then they would have received the property right in the item and they are freely alienable. Thus, patents meet all the tests of a property right.
Ideally, we want everyone involved in an enterprise that can be described as monopolist competition. In a perfect economy, people would compete on creating and disseminating new technologies and not in producing products or services indistinguishable from their competitors. People would then plow their profits back into creating even more inventions. Wouldn’t this put the consumer at the mercy of every producer and would not the first mover end up dominating a market for eternity?
New technologies supplant existing technologies and make them obsolete. An entrenched company in a present technology rarely has any special advantage over a new entrant in the marketplace with a new technology. The book, The Innovator’s Dilemma, provides examples of why it is difficult to transition to the next technology for a market leading company in a current technology. The conclusion from this is that a market based on property rights, but without government rules entrenching incumbent firms, is not going to become dominated by huge existing firms. It will be a market dominated by new firms introducing new products. The average Fortune 500 company today has a lifespan of forty years, and in the most innovative sectors, the turnover is much quicker. One third of the companies listed as a Fortune 500 in the 1970s no longer exist.[2]
The supposed conflict between monopolistic competition and perfect competition is nonexistent. Perfect competition is a technologically stagnant world in which humans regress back into the Malthusian Trap. Only with the prospect of substantial profits can anyone rationally invest in new technologies that make us all wealthier. This does not lead to a world dominated by incumbent companies, but to a dynamic market where new companies compete to make the next disruptive technology and company life spans are relatively short.
Industrial Revolution
One of the most important questions in economics is why did the Industrial Revolution occur where and when it did? As pointed out by William Rosen, author of The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention, there are hundreds of theories on this, but most of these theories miss an obvious point- “… the Industrial Revolution was, first and foremost, a revolution in invention.” According to Rosen, the Industrial Revolution was a perpetual invention machine.
This is not surprising, since inventions are the way that homo economicus creates wealth. The Industrial Revolution represents the first mass escape from the Malthusian Trap by humans. As pointed out above, the majority of history is consistent with the idea that the rate of new inventions is dependent on the size of the population until the Industrial Revolution.[3] So why did this suddenly change in the 1800s inBritain? Let’s first examine some of the standard explanations for how to create growth in the economy.
Does per capita income take off around 1800 because taxes suddenly get lower (or higher) around 1800? Tax levels did not change significantly around 1800, in fact, they were lower than current levels until around 1900. Taxes averaged 10% or less of GDP during most of history. Did the size of government suddenly shrink (or grow) around 1800? Government size did not change significantly around 1800; the size of government did not start to grow until around 1900. Did any government put a mechanism to stimulate demand in place: the world’s greatest “cash for clunker program”?– Was Keynes correct in saying a government has to stimulate demand? The period until about 1800 AD is called the Malthusian period, after Thomas Malthus. During this period, our population expands until we are on the edge of starvation. There certainly was plenty of demand during this period, at least for food. Does income suddenly take off because we tinker with our money supply? The tools for controlling the money supply around 1800 were crude at best.
The reason the Industrial Revolution starts in England, at the end of the 18th century, is because England created a property right in inventions – patents. Patents are the only free market system for encouraging people to invest in inventions and technology. Patents are the legal title to an invention.
The reason why the US overtakes Britain in the Industrial Revolution is that the US creates a better patent system than Britain. The first patent statute in the USis passed in 1790. The USbecomes the economic and technological leader of the world not because its citizens have some innate “yankee ingenuity,” but because of how the US designed a system that better protects an inventor’s right in their invention. The United States is the first country in history to recognize an inventor’s property right in their invention.[4]
As pointed out in the section entitled Exogenous vs. Endogenous, the rate of inventing is influenced by market forces. At the beginning of the Industrial Revolution, there were no big government sponsored research projects inEnglandor theUnited States. The explosion of inventions at this time was driven by market forces and the ability to capitalize on such.
This is not to say that a patent system can create economic growth or technological growth in a vacuum. If the government imposes a tax system that confiscates all income, then ownership in your invention has no value. If the government imposes rules on the entry of new technologies to the market, then the value of your invention is severely curtailed. The ability to exploit an invention once it is created and the inventor has legal title to his invention, is subject to essentially the same constraints and incentives as other business enterprises.
The reason the Industrial Revolution began in Englandin the late 18th century is that this is whenEngland and then theUnited States recognized a property right for inventions.
Given the importance of inventions to economics, it is amazing the lack of economic research in this area. Jacob Schmookler’s groundbreaking econometric studies is one of the exceptions.[5] He investigated whether the number of inventions is limited, whether market forces or scientific advances had a bigger impact on the number of inventions and the direction of inventions, the average value of a patent, the percentage of patents that find their way into commercial products, etc. Interestingly, he found that over 50% of all patents are commercialized, despite the often repeated statement that only 1-2% of patents are ever commercialized.[6]
Zorina Khan and Kenneth L. Sokoloff examined the historical development of patent laws and their affect on the rate of invention. Most of the endogenous growth theorists tend to consider invention too narrow in describing the causes of economic progress, while recognizing that economic growth is caused by increases in our level of technology and that incentives matter in the creation of new technologies. This author’s opinion is the failure to define what a new technology is has resulted in GIGO syndrome.
A question that has not been investigated is whether there are natural laws of invention. Many economists now consider natural laws in economics to be irrelevant. As a physicist, I would respectfully disagree. Natural laws have taken us to the moon and back, allowed us to manipulate individual atoms, created machines that can peer inside the human body without damaging tissue, etc. Natural laws organize an area of knowledge and allow one to think conceptually about problems. Following and categorizing logical results has led to some of the greatest discoveries in science.
[1] In the Supreme Court case Graham v. John Deere Co., the Court invokedJefferson’s words that the “embarrassment of an exclusive patent” was a special legal privilege justified only because these “monopolies of invention” served the “benefit of society.”
[2] Stephen, Ravikumar; Creating an Agile Organization through Outdoor
Training, Presentation made at Hyderabad Management Association on March 10, 2000, http://fablar.in/yahoo_site_admin/assets/docs/Ravi_on_Agile_Organisation.9832337.pdf.
[3] Kremer, Michael, Population Growth and Technological Change: One Million B.C. to 1990, The Quarterly Journal of Economics, Vol. 108, No. 3. (Aug., 1993), pp. 681-716, http://links.jstor.org/sici?sici=0033-5533%28199308%29108%3A3%3C681%3APGATCO%3E2.0.CO%3B2-A.
[4] US Constitution, Article 1, Section 8, Clause 8.
[5] Schmookler, Jacob, Inventions and Economic Growth, Harvard Press, 1966
[6] Schmookler, Jacob, Inventions and Economic Growth, Harvard Press, 1966, p.50.
This is a multi-part post on the science of economic growth. Standard economic theory has failed miserably to define the source of economic growth, which means it is impossible for it to provide rational policies to restore economic growth. This series of posts defines a scientific theory of the source of economic growth.
Exogenous vs. Endogenous
Robert Solow assumed that inventions were exogenous and therefore the most important factor in economic growth was essentially out of the reach of economic policy. The exogenous model of growth has been refined by Michael Kremer[1] and more recently by Klasen and Nestmann.[2] These models start with the assumption that inventors (brilliant or lucky) are randomly distributed through out population. As a result, high population rates will lead to higher rates of invention, which will lead to increases in population (Malthusian Assumption). This assumption works reasonably well throughout history, until the Industrial Revolution. There have been attempts to refine the exogenous theory by adding population density. However, none of these adjustments to exogenous theory can explain whyEngland was the epicenter of Industrial Revolution. France had a larger population by a factor of three and larger GDP and equally talented scientists. Why did the U.S. overtake England’s GDP by the 1850s or why the overall GDP per capita and level of technology of the West grew so much faster than the East? The one factor that is consistent is the rate of invention.
A number of economists have shown that inventors are motivated by financial return. For instance, Jacob Schmookler, in Invention and Economic Growth, shows that demand or expected return is the biggest factor affecting the number of inventions in a particular industry.[3] He also examined the role of scientific advances in the creation of new inventions and found that these had minimal effect on the number of inventions.[4] His results were echoed by economic Historian Zorina Khan.[5] She provides extensive evidence that the US patent system and economic forces affect both the level and direction of invention. She shows that the US created the first modern patent system and the patent system provided the major incentive that caused the US to grow from an agrarian economy to a world economic and technology power in just 70 years.[6] Note there was very little government sponsored research and development at the time.
Perhaps the best known endogenous growth theory economist is Paul Romer. Romer makes the distinction between physical property, which is rivalrous, and ideas or recipes as he calls them, which are non rivalrous.[7] He claims that:
With ideas, you have this tension: You want high prices to motivate discovery, but you want low prices to achieve efficient widespread use. You can’t with a single price achieve both, so if you push things into the market, you try to compromise between those two, and it’s often an unhappy compromise.[8]
Romer is ambivalent about patents for this reason. He likes the incentive they provide for creating new inventions.[9] However, he believes that it slows down dissemination of new technologies and results in monopolistic competition.
He further states: “Because everybody can use the idea at the same time, there’s no tragedy of the commons in the intellectual sphere. There’s no problem of overuse or overgrazing or overfishing an idea.”[10]
This statement is misleading as applied to inventions and patents. As soon as the invention is realized in a physical form, then the invention is subject to the same scarcity issues as any other good or service. The total market for an invention is limited (scarce) at a particular point in time and the goods and services necessary to realize an invention in its physical form are also scarce.[11] When the infringer of a patent makes the invention, he reduces the market value of the invention to the inventor. Patent law not only recognizes that ideas cannot be overused by too many people knowing about them, patent law actually encourages the spread of ideas. A primary goal of a patent system is the spread of technical information. Before modern patent systems, people and companies kept their inventions trade secrets, which inhibited the spread of information. In theU.S., our patent system created a number of patent depository libraries to encourage the spread of technical information. It is one of the requirements of patents that the information on how to “practice the invention” is part of the quid pro quo for receiving a property right in your invention. Specifically, 35 USC 112 states:
The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.
Romer’s statement that ideas are not subject to the tragedy of the commons is misleading in another sense also. One of the problems with commons is that when no one owns a resource, no one invests in the resource – or at the least they under-invest in the resource. A system of limited term property rights for inventions is not the unhappy compromise that Romer suggests. It encourages the spread of information about the invention and it provides incentives to both create new inventions and to invest in the dissemination of inventions. Romer implies that it takes no resources to disseminate new inventions and others explicitly state this, but they are incorrect. Inventing the electric light bulb did not allow instantaneous use by people throughout the World. It required investment in manufacturing plants, distribution, an electrical power system, etc. Without secure property rights in the invention, there would have been no incentive for anyone to invest in this dissemination of technology. This was clearly shown in a study by Professor Hughes. The study, British Electrical Industry Lag:1882-1888, examined how limitations on the rights (profits) of British companies attempting to provide electrical lighting resulted in the British lagging significantly behind the United States.[12] Without the incentive of ownership, the British were unable to provide electrical lighting to their country. Lack of strong property rights resulted in under-investment in the electrical industry inBritain. Professor Hughes examines a number of other potential explanations. Differences in technological talent between theU.S. andBritain? The British had more and better trained engineers. The effect of economic downturns? Both countries suffered economic downturn at the same time. Interestingly enough, no other explanation accounts for the difference in the dissemination rates of electrical technology in theU.S. andBritain.
Romer’s emphasis on scarcity and rivalrous vs. non-rivalrous goods, leads to a number of errors. Entropy explains not only why goods are scarce, but why diminishing returns exist and why inventions are how humans overcome entropy and diminishing returns. First, scarcity does not imply diminishing returns. A scarce resource might be as easy to extract the first time as the last. In this case, the resource’s cost would be exactly the same until we ran out of the resource. Scarcity does not explain the ultimate struggle of all life – namely the need to extract more energy than one uses in order to stay alive. Secondly, the nonrivalrous nature of ideas does explain how humans overcome diminishing returns. The emphasis on rivalry leads to the idea that there is some sort of conflict between systems that encourage inventions but supposedly restrict the dissemination of inventions (production). This conflict is also rooted in the idea that we want to maximize the production of goods today (existing inventions). Humans’ long term struggle is to overcome entropy, not to maximize goods today. In order to maximize goods today, we have to devote all resources to production and none to invention. This means we are in a technologically stagnant situation. As explained earlier, this is not sustainable because of diminishing returns and will result in a return to the Malthusian Trap. Our ability to survive and thrive is based on maximizing inventions. This results not only in more of the same goods in the future but a greater diversity of goods. Diversity of goods may be more important than increasing the production of existing goods. For instance, when we find that we are running out of coal we can switch to oil or nuclear power; when we find that one antibiotic is not effective against a new strain of bacteria, we can switch to a different antibiotic. Diversity of goods allows us to withstand external shocks to our economy better than maximizing production of existing goods.
A system that only incentivizes inventions but not dissemination will result in producers that do not focus on either creating or disseminating new inventions. Introducing an invention to the market is a huge risk. Retailers do not know if the product based on the invention will sell. The manufacturer often has to spend money establishing new channels of distribution and investing in new manufacturing facilities. In fact, venture capitalists often estimate the cost of introducing an invention to the marketplace at ten times the cost of inventing. It is always less cost and less time for a manufacturer to simply wait until a product is proven successful and then introduce a copycat product. This allows them to freeload on the marketing, sales, distribution, and inventive efforts of the first mover. There have been a number of business books on this exact point, see Getting to Plan B: Breaking Through to a Better Business Model, by John Mullins and Randy Kosimar[13] see also Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge[14] Without incentives for both creation and dissemination of new technologies, we will have underinvestment in dissemination. Smart companies know that the cost of introducing a new product is expensive and fraught with risk. This is why most large companies focus most of their research and development on line extensions. A Small Business Administration study, An Analysis of Small Business Patents by Industry and Firm Size, found that most emerging technologies are developed by start-ups and individual inventors.[15]
Invention is an endogenous process that is heavily affected by policy decisions. In theUnited States, our unique patent system provided an incentive to invent and to invest in the dissemination of inventions. The patent system also encourages the dissemination of information on which other inventors can build. Because of the high risk of inventing and marketing emerging technologies, most of this effort is undertaken by start-ups and individual inventors. Direct government support for inventive activities in the United Statesin the 19th century was minimal. Despite this, the US went from a mainly agrarian nation at the time of the American Revolution, to the leader of the Industrial Revolution by 1850.
[1] Kremer, Michael, Population Growth and Technological Change: One Million B.C. to 1990, The Quarterly Journal of Economics, Vol. 108, No. 3. (Aug., 1993), pp. 681-716, http://links.jstor.org/sici?sici=0033-5533%28199308%29108%3A3%3C681%3APGATCO%3E2.0.CO%3B2-A.
[2] Klasen, Stephan; Nestmann, Thorsten, Population, Population Density, and Technological Change, CESifo Working Paper Series No. 1209, 2004, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=558105.
[3] Schmookler, Jacob, Inventions and Economic Growth, Harvard Press, 1966, pp 104-164.
[4] Schmookler, Jacob, Inventions and Economic Growth, Harvard Press, 1966, pp 57-86.
[5] Khan, Zorina B., The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920, Cambridge University Press, 2005, pp. 50
[6] Khan, B. Zorina. “Technological Innovations and Endogenous Changes inU.S. Legal Institutions, 1790-1920.” NBER Working Paper No. 10346.Cambridge,MA: March 2004.
[7] Romer, Paul M., “WHICH PARTS OF GLOBALIZATION MATTER FOR CATCH-UP GROWTH?”, p. 7, NBER Working Paper 15755, Cambridge, MA, February 2010, http://www.nber.org/papers/w15755.
[8] Bailey, Ronald, “Post-Scarcity Prophet: Economist Paul Romer on Growth, Technological Change, and an Unlimited Human Future”, Reason, December 2001.
[9] Romer prefers the word “recipes” to “inventions” perhaps because he believes the word invention implies all the complex definitions of patent law. However, I believe this leads to confusion. An invention that is never realized in physical form is meaningless. Once it is realized in physical form it has at least some of the rivalrous features of physical property.
[10] Bailey, Ronald, “Post-Scarcity Prophet: Economist Paul Romer on Growth, Technological Change, and an Unlimited Human Future”, Reason, December 2001.
[11] Even software inventions are subject to scarcity. It takes energy, transmission capabilities, and computers to recreated a software invention.
[12] Hughes, Thomas Parke, British Electrical Industry Lag:1882-1888, Technology and Culture, Vol. 3, No. 1 (Winter, 1962) , pp 27-42, http://www.jstor.org/pss/3100799.
[13] Mullins, John and Kosimar, Randy, Getting to Plan B: Breaking Through to a Better Business Model, Harvard Business Press,BostonMA, 2009.
[14] Shenkar, Oded, Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge, Harvard Business Press,BostonMA, 2010.
[15] Breitzman, Anthony; Hicks, Diana, An Analysis of Small Business Patents by
Industry and Firm Size, Under contract no. SBAHQ-07-Q-0010, November 2008, http://archive.sba.gov/advo/research/rs335tot.pdf.
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