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Patents and Research Investments: Assessing the Empirical Evidence

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  • Eric Budish
  • Benjamin N. Roin
  • Heidi Williams

Abstract

A well-developed theoretical literature--dating back at least to Nordhaus (1969)--has analyzed optimal patent policy design. We re-present the core trade-off of the Nordhaus model and highlight an empirical question which emerges from the Nordhaus framework as a key input into optimal patent policy design: namely, what is the elasticity of R&D investment with respect to the patent term? We then review the--surprisingly small--body of empirical evidence that has been developed on this question over the nearly half century since the publication of Nordhaus's book.

Suggested Citation

  • Eric Budish & Benjamin N. Roin & Heidi Williams, 2016. "Patents and Research Investments: Assessing the Empirical Evidence," American Economic Review, American Economic Association, vol. 106(5), pages 183-187, May.
    • Handle: RePEc:aea:aecrev:v:106:y:2016:i:5:p:183-87
    Note: DOI: 10.1257/aer.p20161091
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    References listed on IDEAS

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    1. Sakakibara, Mariko & Branstetter, Lee, 2001. "Do Stronger Patents Induce More Innovation? Evidence from the 1988 Japanese Patent Law Reforms," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 77-100, Spring.
    2. Paul Klemperer, 1990. "How Broad Should the Scope of Patent Protection Be?," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 113-130, Spring.
    3. Josh Lerner, 2009. "The Empirical Impact of Intellectual Property Rights on Innovation: Puzzles and Clues," American Economic Review, American Economic Association, vol. 99(2), pages 343-348, May.
    4. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 106-112, Spring.
    5. Edwin Mansfield, 1986. "Patents and Innovation: An Empirical Study," Management Science, INFORMS, vol. 32(2), pages 173-181, February.
    6. Eric Budish & Benjamin N. Roin & Heidi Williams, 2015. "Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials," American Economic Review, American Economic Association, vol. 105(7), pages 2044-2085, July.
    7. Yi Qian, 2007. "Do National Patent Laws Stimulate Domestic Innovation in a Global Patenting Environment? A Cross-Country Analysis of Pharmaceutical Patent Protection, 1978-2002," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 436-453, August.
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    Citations

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    Cited by:

    1. Dosi, Giovanni & Palagi, Elisa & Roventini, Andrea & Russo, Emanuele, 2023. "Do patents really foster innovation in the pharmaceutical sector? Results from an evolutionary, agent-based model," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 564-589.
    2. Benslimane, Ismaël & Crosetto, Paolo & Magni-Berton, Raul & Varaine, Simon, 2023. "Intellectual property reform in the laboratory," Journal of Economic Behavior & Organization, Elsevier, vol. 206(C), pages 204-221.
    3. Auriol, Emmanuelle & Biancini, Sara & Paillacar, Rodrigo, 2023. "Intellectual property rights protection and trade: An empirical analysis," World Development, Elsevier, vol. 162(C).
    4. Joan Farre‐Mensa & Deepak Hegde & Alexander Ljungqvist, 2020. "What Is a Patent Worth? Evidence from the U.S. Patent “Lottery”," Journal of Finance, American Finance Association, vol. 75(2), pages 639-682, April.
    5. Arianna Martinelli & Alessandro Nuvolari & Elisa Palagi & Emanuele Russo, 2022. "Digitalization, copyright and innovation in the creative industries: an agent-based model," LEM Papers Series 2022/03, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    6. Robin Kaiji Gong & Yao Amber Li & Kalina Manova & Stephen Teng Sun, 2023. "Tickets to the global market: First US patent awards and Chinese firm exports," CEP Discussion Papers dp1962, Centre for Economic Performance, LSE.
    7. Hu, Mei-Ying & Lu, You-Xun & Lai, Ching-chong, 2023. "Patent term extensions and commercialization lags in the pharmaceutical industry: A growth-theoretic analysis," Journal of Macroeconomics, Elsevier, vol. 76(C).
    8. Kuroiwa, Kenichi, 2022. "Do stronger intellectual property rights increase patents? Natural experiments in Japan," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322564, Agricultural and Applied Economics Association.
    9. Bhaven N. Sampat, 2018. "A Survey of Empirical Evidence on Patents and Innovation," NBER Working Papers 25383, National Bureau of Economic Research, Inc.
    10. Jeanjean, Francois & Lebourges, Marc & Liang, Julienne, 2019. "The impact of license duration on tangible investments of mobile operators," Telecommunications Policy, Elsevier, vol. 43(9).

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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