What drives innovation? How does it contribute to the growth of firms, industries, and economies? And do intellectual property rights help or hurt innovation and growth? Uniquely combining microeconomics, macroeconomics, and theory with empirical analysis drawn from the United States and Europe, this book introduces graduate students and advanced undergraduates to the complex process of innovation. By addressing all the major dimensions of innovation in a single text, Christine Greenhalgh and Mark Rogers are able to show how outcomes at the microlevel feed through to the macro-outcomes that in turn determine personal incomes and job opportunities. In four sections, this textbook comprehensively addresses the nature of innovation and intellectual property, the microeconomics and macroeconomics of innovation, and economic policy at the firm and macroeconomic levels. Among the topics fully explored are the role of intellectual property in creating incentives to innovate; the social returns of innovation; the creation and destruction of jobs by innovation; whether more or fewer intellectual property rights would give firms better incentives to innovate; and the contentious issues surrounding international treaties on intellectual property. Clearly organized and highly readable, the book is designed to be accessible to readers without advanced economics backgrounds. Most technical materials appear in boxed inserts and appendixes, and numerous graphs and tables elucidate abstract concepts.

Preface xiReferences xviPART I: The Nature of Innovation 1Chapter 1: The Nature and Importance of Innovation 31.1 Introduction 31.2 What Is Innovation? 41.3 The Microeconomic Effects of Innovation 91.4 Interaction between Producers and Users of Innovation 161.5 Innovations and Market Failure 171.6 Restoring Incentives to Invent and Innovate 231.7 Firms Competing through Innovation 281.8 Conclusion 29References 30
Chapter 2: The Nature and Role of Intellectual Property 322.1 Introduction 322.2 Why Are Intellectual Property Rights Awarded? 322.3 Patents 342.4 Trademarks 392.5 Designs and Utility Models 432.6 Copyright 452.7 Further Questions about IPRs 492.8 Conclusions 53References 55
Chapter 3: The Measurement of Innovation, Productivity, and Growth 573.1 Introduction 573.2 How Can Innovation Be Measured? 583.3 Illustrations of Innovation Statistics 643.4 Productivity at the Firm, Industry, and Economy Level 703.5 Comparing Productivity and Growth across Countries 743.6 Conclusion 80References 82
PART II: The National Innovation System 85Chapter 4: The National Innovation System 874.1 Introduction 874.2 The National Innovation System 874.3 The Central Role of R&D 884.4 The Government-University Axis 924.5 The University-Business Axis 954.6 The Government-Business Axis 1034.7 National Innovation Systems in Emerging Markets 1064.8 Conclusions 110References 112
Chapter 5: Innovative Firms and Markets 1165.1 Introduction 1165.2 Entrepreneurship and New Firms 1165.3 Innovation and Firms 1195.4 Markets and Innovation 1215.5 Empirical Evidence on the Returns to Innovation 1325.6 Evidence on Interactions between Competition and Innovation 1405.7 Conclusions 142References 145
Chapter 6: Intellectual Property Rights and Firms 1496.1 Introduction 1496.2 How Can Firms Benefit from IPRs? 1506.3 Exploring the Returns to IPRs 1526.4 Markets for IPRs 1576.5 Costs of Obtaining and Enforcing IPRs 1606.6 IPR Strategies 1626.7 Empirical Studies on the Value of IPRs 1646.8 Conclusions 171References 173
Chapter 7: Diffusion and Social Returns 1777.1 Introduction 1777.2 Modeling the Rate of Adoption of an Innovation 1797.3 Statistical Evidence on Rates of Adoption 1867.4 Spillovers and Social Returns to Innovation 1907.5 Empirical Studies of Social Returns 1997.6 Spatial Dimensions of Spillovers 2047.7 Conclusions 205References 207
PART III: The Macroeconomics of Innovation 211Chapter 8: Models of Economic Growth 2138.1 Introduction 2138.2 The Neoclassical Growth Model 2158.3 Endogenous Growth Models 2258.4 Evolutionary and Other Models 2378.5 Conclusions 239References 241
Chapter 9: Innovation and Globalization 2439.1 What Is Globalization? 2439.2 World Trade in Historical Perspective 2459.3 Theories of Trade and Growth 2469.4 International Knowledge and Technology Flows: Theory and Evidence 2509.5 International Financial Flows 2569.6 International Aspects of IPRs 2609.7 Conclusions 263References 266
Chapter 10: Technology, Wages, and Jobs 26810.1 Introduction 26810.2 Microeconomic Models of Innovation and Labor Markets 26810.3 Innovation and Labor Markets: Evidence from Firms 27510.4 Macroeconomic and Trade Models of Innovation and Labor Markets 28010.5 Conclusions 289References 291
PART IV: Economic Policy 295Chapter 11: Microeconomic Policies to Promote Firm-Level Innovation 29711.1 Introduction 29711.2 Is the Intellectual Property System Working? 29711.3 Incentive Systems for Encouraging Firm-Level R&D 31311.4 Other Innovation Policies 31711.5 Conclusions 323References 325
Chapter 12: Macroeconomic Issues and Policy 32912.1 Introduction 32912.2 Macroeconomic Evidence on IPRs and Economic Growth 33012.3 Trade-Related Aspects of Intellectual Property (TRIPS) 33412.4 Intellectual Property Rights, Exhaustion, and Parallel Imports 34012.5 Piracy and Counterfeit 34212.6 R&D in the Global Economy 34412.7 International Migration of Skilled Labor 34612.8 Conclusions 347References 349
Mathematical Appendix 353A.1 Production Functions 353A.2 Present Discounted Value 354A.3 Derivatives 355A.4 Marginal Products and Diminishing Returns 356A.5 Accumulation Equations and Growth Rates 357A.6 Logarithms and Production Functions 358A.7 Differential Equations and a Catch-up Model 358A.8 Estimating Production Functions 359References 360Index 361