Intellectual property rights, social values, and innovation: a cross-country simultaneous equations model

The WTO-led globalization is often believed to be the era of transfer and homogenization of the so-called ‘Global Standard Institutions’ (GSI). The institution of Intellectual Property Rights (IPR) is a case in point, where various trade treaties have persuaded countries to homogenize the IPR laws, purportedly, to boost technological change and innovation. Such enthusiasm to homogenize the international policy space, however, is often at odds with the conjectures made by the scholars on institutions, who suggest that transfer of institutions across societies are burdened with problems of incompatibilities with other existing institutions, social values and historical, country-specific contingencies. Moreover, academic scholarship is divided on the relationship between IPR and innovations. This paper uses cross-country simultaneous equation estimations to analyze the two-way relationships between IPR, its underlying social values, historical-political contingencies, and innovation. Taking into consideration both technological and non-technological innovation, our results suggest that the impact of IPR on innovation dynamics of a country is neither one-way nor linear. Besides, various social values and historical contingencies seem to have a complex relationship with, and consequence on, the dynamics of innovation and IPR. The results suggest the need for interlinking development policies with the policies for innovations.