F. M. Scherer Photo

F. M. Scherer

Professor of Public Policy and Corporate Management in the Aetna Chair, Emeritus
Office Address
Scherer, F.M. "First Mover Advantages and Optimal Patent Protection." Journal of Technology Transfer 40.4 (August 2015): 559-580.


This paper examines the economic logic underlying so-called “first mover advantages” as alternatives to patent protection in allowing innovators protection from immediate imitation and time to recoup their research and development investments. These include a head start, lower costs due to learning by doing, and product-differentiating reputational advantages. William Nordhaus’ theory of optimal patent protection is extended to cases of product, as distinguished from cost-saving, innovation. Over the parameters covered by a simulation analysis, profit potentials sufficient to induce R&D investment are found much more frequently than R&D incentive failures. R&D failures occur most commonly in small markets and situations in which imitators’ erosion of the innovator’s market share is particularly rapid. Implications for patent policy are drawn.