Old Wine in New Bottles: Patenting Propensity

Although patenting propensity has been an old topic, our understanding of it is still fragmentary due to the complexity in the decision-making and the data limitations in empirical research. This paper first provides a conceptual framework showing that firm characteristics, business opportunities, and the patent system jointly determine firms’ patenting decisions. Using a unique dataset merging patent data from multiple patent offices with firm-level data during 2000–2008 for Canadian firms, we then study patenting propensity empirically. We find that firms’ propensity to patent is associated with firm age, size, expenditure on research and development, and profitability, as well as business opportunities measured by industry-level exports. Further, Canada’s participation in the Patent Cooperation Treaty as an International Search Authority has encouraged more firms to patent. Theoretical and empirical investigations support the idea that a useful framework of studying firms’ patenting propensity should simultaneously consider firms’ internal and external factors within and outside the patent system.