This paper investigates when patent races will be characterized by vigorous competition
and when they will degenerate into a monopoly. Under some conditions, a firm with
an arbitrarily small headstart can preempt its rivals. Such ‘ε-preemption’
is shown to depend on whether a firm that is behind in the patent race, as measured
by the expected time remaining until discovery, cant ‘leapfrog’ the competition
and become the new leader. An example of an R&D game with random discovery illustrates
how ε-preemption can occur when leapfrogging is impossible. A multi-stage R&D
process allows leapfrogging and thus permits competition. A similar conclusion emerges
in a model of a deterministic patent race with imperfect monitoring of rival firms'
R&D investment activities.