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Economics of Innovation

This course will be held in English

You can find the most recent information to this course here.


Course description: 02-VWL:MSc-V1-3


Rhythm: summer semester


Lecturer: Univ.-Prof. Dr. Georg Götz


Required Work:

  • Final exam
  • Assignments
  • Group paper and presentation


Course Description

This course gives an overview over the economic study of innovation and the production of new goods and services. Students will learn about the importance of the research and development activities of firms and how they are influenced by public policy in general and by the patent system in particular. The course introduces patent races, the economics of licensing, and the study of adoption and diffusion of new technology. A further topic concerns R&D cooperation with a focus on the working of Research Joint Ventures. Throughout the course we will discuss the Schumpeterian themes of the relation between market structure, firm size and innovation. The course will also evaluate current technology policy as implemented in various countries. A seminar-like part will conclude the course with various case studies of firms’ research and development activities and innovations with a special focus on the pharmaceutical sector. We will have industry experts discussing their experience.

To get a first impression on what the course is about, you might want to look at the introductory chapter of William M. Baumol's book "The free market innovation machine" (s. literature). For a starting point in the management literature see the collection on Top 10 Lessons on the New Business of Innovation from the MIT-Sloan Management Review 2011.


Very prelimonary Agenda (subject to change)

  • Introduction
  • Models of Imperfect Competition
  • The Basic Model (Social vs. private returns of innovations); Persistence of monopoly
  • Industrial structure and the volume of R&D expenditures (Dasgupta, Stiglitz, 1980)
  • Patents and Patent Policy
  • Licensing
  • Uncertainty and R&D: Patent Races
  • Adoption and diffusion of new technology
  • Research Joint Ventures
  • Network effects, standardization, and compatibility
  • Innovations and growth
  • Innovation and Antitrust Policy
  • Technology Policy
  • Seminar on “(Pharmaceutical) Innovation and Technology Policy”



  • Baumol, W. The Free Market Innovation Machine – Analyzing the Growth Miracle of Capitalism, 2002, Princeton University Press
  • Pepall, Richard, and Norman (PRN): Industrial Organization: Contemporary theory and practice, South Western, 3rd edition. 2005, chapters 22-24.
  • Tirole, J.: The Theory of Industrial Organization, MIT Press 1988, ch.10;
  • Stoneman, P. (ed.): Handbook of the Economics of Innovation and Technological Change, ch. 1, 4, 5, 7, 11, 12.
  • Brownwyn Hall, Nathan Rosenberg (eds.) Handbook of the Economics of Innovation, Vol 1 and 2, Elsevier, 2010.