Innovation Beyond Patents: Technological Complexity as a Protection against Imitation

A large portion of innovators do not patent their inventions. This is a rela-tive puzzle since innovators are often perceived to be at the mercy of imitators in the absence of legal protection. In practice, innovators however invest actively in making their products technologically hard to reverse-engineer. We consider the dynamics of imitation and investment in such protection technologies, both by the innovator and by imitators. We show that it can justify high level of pro\u85ts be-yond patents and can account for the di¤erences across sectors in the propensity to patent. Surprisingly, in general, the protection technologies that yield the highest pro ts for the innovator are expensive and do not protect well. Our model also al-lows us to draw conclusions on the dynamics of mobility of researchers in innovative industries. The authors gratefully acknowledge very helpful comments by Mariagiovanna Baccara, Michel