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Why do firms patent?

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  • Gaetan de Rassenfosse

Abstract

Firms' decisions to patent innovations involve a complex evaluation of costs, benefits, and strategic considerations. This article explores the economic and practical factors that influence whether companies seek patent protection. It discusses explicit monetary costs--such as legal fees, filing, and international expenses--and non-monetary costs related to public disclosure. Benefits include the provision of exclusion rights that secure returns and protect competitive advantages. Additionally, firms use patents as strategic tools to block rivals, strengthen bargaining positions, signal innovation quality, and attract investment. The analysis also considers alternative protection strategies like secrecy, particularly for small enterprises or industries where disclosure is detrimental.

Suggested Citation

  • Gaetan de Rassenfosse, 2025. "Why do firms patent?," Papers 2503.11555, arXiv.org, revised Apr 2025.
    • Handle: RePEc:arx:papers:2503.11555
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    References listed on IDEAS

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    1. Gaétan Rassenfosse, 2012. "How SMEs exploit their intellectual property assets: evidence from survey data," Small Business Economics, Springer, vol. 39(2), pages 437-452, September.
    2. Harabi, Najib, 1995. "Appropriability of technical innovations an empirical analysis," Research Policy, Elsevier, vol. 24(6), pages 981-992, November.
    3. Blind, Knut & Edler, Jakob & Frietsch, Rainer & Schmoch, Ulrich, 2006. "Motives to patent: Empirical evidence from Germany," Research Policy, Elsevier, vol. 35(5), pages 655-672, June.
    4. Arundel, Anthony, 2001. "The relative effectiveness of patents and secrecy for appropriation," Research Policy, Elsevier, vol. 30(4), pages 611-624, April.
    5. Arundel, Anthony & Kabla, Isabelle, 1998. "What percentage of innovations are patented? empirical estimates for European firms," Research Policy, Elsevier, vol. 27(2), pages 127-141, June.
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