Intellectual Property Rights and Innovation in Developing Countries: Evidence from Panel Data
The determinants of innovation and the role of intellectual property rights in different countries are not well understood. This paper estimates the determinants of innovation using a new panel dataset. It compares different panel estimation methods appropriate for finite size samples. Past R&D investments have a positive and significant impact on current innovation, demand-pull factors are also important in all country groups, and the structure of the economy has a negative (positive) impact in developing (industrialized) countries. Intellectual property protection is only significant for developing countries. The least-square dummy variable corrected estimator is found to be the most appropriate for small, unbalanced datasets. We discuss econometric issues and the policy implication of these results.
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