What is Barriers to Entry? Patents are granted to inventors of a product or process for a certain number of years. The reason for this is to encourage innovation in the economy. Without the existence of patents, it is argued that research and development for improved electronics is unlikely to take place, since there's nothing preventing another firm from stealing the idea, copying the product, and producing it without incurring the development costs.

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Business

Jonas Sampson

4 May, 06:21

What is Barriers to Entry? Patents are granted to inventors of a product or process for a certain number of years. The reason for this is to encourage innovation in the economy. Without the existence of patents, it is argued that research and development for improved electronics is unlikely to take place, since there's nothing preventing another firm from stealing the idea, copying the product, and producing it without incurring the development costs.

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Erik Lucas · Answer 1

Barriers to entry are mechanisms to protect a given market against competitors entering specific contexts. Barriers to entry are associated with stimulating the development of new technologies. Patents are a traditional example of an entry barrier.

The need for patents is explained for economic and strategic reasons. A company that develops a technology such as innovative medicine or electronics incurs high development costs. Therefore, the government gives this company a temporary monopoly of the product by granting the patent. If upon completion of the product other companies could copy the product, no company would have been encouraged to spend large sums on technology development. Therefore, the patent is a barrier to entry that has a strategic imprint on technological development.