Intellectual property rests on a simple incentive rationale: without imitation barriers, innovators rationally decline to invest. But this blanket proposition is incompatible with markets where innovation proceeds without substantial recourse to intellectual property and imitation is widespread. This discrepancy sometimes drives the alternative view that intellectual property or other access barriers often or even usually are not prerequisites for intellectual production. But “utopian” understandings oversimplify the complex incentive structures and circumscribed conditions under which some markets can induce innovation without intellectual property or practical equivalents. A simple rationalchoice framework anticipates that “sharing regimes”—that is, innovation environments bereft of exclusionary barriers but governed by reputational norms—can sustain a viable habitat for innovation but inherently deteriorate as endowment heterogeneity, group size, asset values and capital intensities increase. Empirics substantially track theory: industries that sustain innovation without robust intellectual-property protections tend to be confined to “low-stakes” innovation settings or make indirect recourse to other exclusionary instruments. Critically, however, it is also the case that voluntarily-formed sharing arrangements pervade even economically-intensive markets. Properly understood, these sharing arrangements do not substitute for property but provide a vital complementary mechanism that alleviates the transaction-cost burden of an exclusionary regime. Examination of three “best cases” for the view that intellectual production can proceed without intellectual property—premodern craft guilds, academic research and open-source software—supports this intermediate position: sharing practices proliferate to facilitate the low-cost circulation of knowledge assets but are consistently embedded within a legal or technological infrastructure that implements some barriers to imitation.


Economics | Intellectual Property | Internet Law | Law and Economics

Date of this Version

October 2008