Following the traditional North-South models, more recent studies address the issue of transition from imitation to innovation (van Elkan 1996; Currie et. al 1999) and even switching of leadership roles (Brezis, Krugman and Tsiddon 1993). In the former studies, transition from imitation to innovation is determined by the rate of knowledge spillovers and the ease of imitation. South switches to innovation when the knowledge gap between the North and South becomes small and imitation becomes too costly.
In the subsequent models, also explained as leapfrogging models, a lagging economy’s ability to adopt a new technology before the traditional leader (sometimes due to its unwillingness to give up a successful older technology), can lead to a switch in leadership roles. While the mechanism of innovation in the North is by now well understood, the process by which imitation occurs is not so clear. Specifically, Paul Romer’s (1990) seminal work illustrates that innovation is the consequence of the allocation of human capital to profit driven research.
This notion is then extended by Rivera-Batiz and Romer (1991 a, b), to the case of trade and knowledge sharing between symmetrically innovating countries. However, in the North-South models where the North innovates and the South imitates, this symmetry breaks down. Due to the complexity that the absence of symmetry creates, most North-South models (cf. Grossman and Helpman 1991 a,b; van Elkan 1996; Currie et. al. 1999; Lin, 2002) have had to sacrifice the microeconomic specificity of the knowledge transfer and accumulation mechanism, assuming instead, that innovation and imitation occur through some exogenous macroeconomic process.
An implicit underlying assumption of this approach is that knowledge is a public good that can be freely appropriated by producers anywhere. Integration into the international economy provides a country the necessary access to this knowledge base. The leapfrogging models also tend to abstract away from the mechanism of technology transfer, assuming instead that productivity differences between two countries determines who adopts a new technology first.
Yet, Keller (1996), points out that mere access to information is not sufficient for technological catch-up. In particular, skill levels of domestic workers constrain a country’s ability to absorb and implement technologies invented abroad. (Datta ; Mohtadi 2005; p. 2) Intellectual property is a common term, which refers to the rights to the products of individuals’ creativity, including scientific discoveries, industrial design, and literary and artistic works. Intellectual property policy is intended to set symmetry between two objectives:
1) Gratifying creators and inventors for innovation, and 2) Promote access by business and public to science, technology and culture. Patents protect the inventions that pharmaceutical companies exploit as a result of research and development and are an important incentive to research and development and to innovation in general. The term patent comes from the first Letters Patent, which granted an inventor or importer of a new technology the sole right to use it for a period sufficiently long to establish his business.
These can be clustered into six basic kinds of intellectual property rights (OECD, 1996). Patents speak about inventions. Copyrights talk about literary or artistic works and also extend to engineering drawings, computer software and other areas beyond the field of the arts. Designs are related to shapes and configurations, including layout designs (topographies) of integrated circuits. Trademarks pertain to words or symbols applied to products or services to recognize source or sponsorship.
Plant varieties protection provides exclusive rights in plant ranges based on the model of the 1978 International Union for the Protection of New Varieties of Plant. Apart from copyrights, all the other discussed rights must be applied for to the relevant national authority according to statutory law and procedures. Trade secret protection protects confidential and undisclosed information and does not require registration or formalities. (Carlton, Perloff; 2005, p. 526)
The term industrial property embraces protection of invention by means of patents, utility models (a form of protection for inventions that do not meet all the requirements of patent ability or do not need full patent protection, that is considered to be very useful for small firms, in particular in Europe), protection of certain commercial interests by means of trademark law and law on trade (brand) names, and the law on protection of industrial designs. In addition, it includes the repression of unfair competition. (Carlton, Perloff 2005; p. 527)
Copyright was considered as a less significant and somewhat creative form of intellectual property, but now it has become another major international factor in technological, scientific and trade development. It is the major tool for protection of the products of economic players such as the film, publishing and recording industries and, since the mid-1980s, computer software that became internationally protected by copyright. It is estimated that these so-called copyright industries together represent between 2 and 6 per cent of the GNP of most OECD countries.
Patents protect the inventions that pharmaceutical companies exploit as a result of research and development (R&D) efforts. Even though they are often combined with other forms of protection, patents have traditionally been considered as one of the main incentives for R&D. The various types of intellectual properties become more inter-related as a set of tools that companies can use individually or in combination in order to support their strategic market objectives. Accordingly, intellectual property has been a growing concern in global forums.