Essays on R&D, innovation and patents: Empirical constructs and policy analysis of uncertainty

Two sources of uncertainty in the process of innovation are the outcomes of research and development (R&D) projects and the exercise of patent rights. Incomplete knowledge about the cause and effect reflect relationships underlying new inventions creates uncertainty in the outcome of R&D projects. Patents constitute an uncertain property right because several institutions of patent enforcement allow a patent to be invalidated or have the scope of the claims reduced after the patent has been issued. This thesis examines the nature and consequences of both kinds of uncertainty by considering the strategies employed to manage an R&D pipeline and proposals for reform to patent policy.;Based on an analysis of the process by which a pharmaceutical R&D pipeline is managed, we propose that decision-makers contend with the uncertainties of R&D through a process of retrospective analysis known to organization theorists as "sensemaking." According to this sensemaking hypothesis, the significance of information-processing heuristics employed in the project selection process becomes fully understood only after a project has been abandoned or successfully completed.;Uncertainty in patent rights affects the relative efficiency of the patent system differently in high and low fields of innovation. Institutions of patent enforcement that create uncertain property rights are unlikely to be efficiency-enhancing in high technology fields of invention where the welfare gains from technical change can easily outweigh the social losses due to reduced levels of competition resulting from patent enforcement.;Even so, institutions of patent enforcement that eliminate all uncertainty in patent rights are not necessarily desirable. Using an incomplete contracts framework, we show that optimal patent policies will exploit the risk of post-issuance invalidation so as to induce the patentee to provide a more complete disclosure of the prior art to the Patent Office. Such information improves the efficiency of the patent system by reducing the welfare losses due to improvidently-issued patent claims, and by creating more stable property rights, which creates greater incentives for investment in R&D.