We find that the protection against subsequent innovators is counterproductive for innovation and welfare, while some (generally not full) protection against imitation is good in both dimensions. We also find that the net welfare gains from increasing IP protection are increasing with the...

It is commonly argued that when innovation is sequential, and the product has network externalities, incumbents build a large network that inefficiently blocks the entry of future incompatible innovators. This paper shows that when intellectual property rights permit some degree of compatibility...