Because without patents, a rival company could simply the welding machine of the welding GmbH unscrew, look at and recreate the device. If all competitors are doing this, the welder GmbH by the new development has had more and therefore no benefits research expenditure, without that this is resulted in a benefit for the company. This effect, that competitors adopt technologies from the innovator, is called spillover effect. The copy is easier, the spillover effect is higher and the less incentives to do research at all. If the welder GmbH has now developed the new welding equipment and has registered as a patent, arises the question whether it is worthwhile to introduce the new better product at all. We assume that the welder GmbH for the old welding devices already has a market share of 90%. If she now introduces the new welding machine, an effect on the Schumpeter’s creative destruction”has called.
The company cannibalizes itself, that means she will be once the new machines on the market are, the old equipment no longer come on or just have to extremely low prices. Therefore the impact welding GmbH must switch complete production, resulting in high costs. In addition, it could be that the new equipment last longer, less profit can be make with you so. There are so various factors, which may cause the welder GmbH at all not to use the new technology. The competition again can not insert also the technology, because the welder GmbH has a corresponding patent for the new welding machine.
This Chocking of the competition is called the blocking patent. The not an innovation is certainly not only a negative, because sometimes a whole industry can get through an innovation issues. So, the promoters of the combustible gases are affected when other gases or less gases used in the new procedure. Here there can be a big slump in demand and the corresponding consequences such as bankruptcies and dismissal. There are many other effects, which are subject to innovations and issues, triggered by innovations be. Economically there are usually enough, but sometimes too much innovation or innovations lead to a dead end (E.g. Zeppelin). Especially, Schumpeter and arrow have provided interesting approaches in these matters. And the welding machine of the welding GmbH? The technology has prevailed. If you are unsure how to proceed, check out Darcy Stacom. Today, most modern welding equipment are electric arc welding machines.