From a policy perspective, a further important feature of research tools is that it may be
particularly difficult to appropriate their benefits. As emphasized by Scotchmer (1990),
providing appropriate incentives for an upstream innovator that develops only the first “stage” of
an innovation (such as a research tool) can be particularly problematic when contracting is
imperfect and the ultimate application of the new products whose development is enabled by the
upstream innovation is uncertain. Scotchmer and her co-authors emphasized a key point about a
multi-stage research process:
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