Incomplete Contracts, Intellectual Property and Institutional Complementarities

In the New Property Rights model ownership of assets should be assigned to the most capable agents. While, in a world of incomplete contracts, the application of the model to IPRs provides insights on the nature of their second best allocation, suggesting a direction of causation going from technology to property rights, also the opposite direction of causation may arise: owners of IPRs tend to develop more capabilities in the production of new IPRs. For some firms and countries, a virtuous complementarity between the development of IPRs and skills arises. For others, the disincentive effect of the exclusion from intellectual property has more damaging consequences than the lack of access to material capital.