when the ultimate innovation that creates value requires multiple
steps, providing appropriate innovation incentives are not only a question of whether and how to
provide property rights in general, but also of how best to distribute property rights and
incentives across the multiple stages of the innovation process. Lack of incentives for earlystage innovation can therefore mean that the tools required for subsequent innovation do not
even get invented; strong early-stage property rights without adequate contracting opportunities
may result in “hold-up” for later-stage innovators and so reduce the ultimate impact of the tool in
terms of commercial application.
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