International Openness and Patent Activity: First Descriptive Results Very preliminary draft

Empirical research on the linkage between trade openness and productivity growth takes center stage in most studies in search for the effects of trade liberalization on economic progress. This is true for both the firm level and for aggregate analyses. There exist various channels through which trade influences national productive structures and creates incentives for individual firms to be more innovative: pure knowledge spillovers (technological externalities), market size effects or pecuniary externalities, increased product market competition and the fear of entry. Related to this discussion, we explore (i) the effect of openness on patent activity at the national level taking the whole panel of 23 countries; (ii) the effect of openness on patent activity with respect to the EU enlargements; (iii) differences across countries and between subgroups (e.g. EU15 - CEEC); (iv) differences across sectors and their dynamics. Accordingly, the effects of trade openness on the performance of a country are addressed by focusing on inventorship activity instead of using an average aggregated productivity index. Therefore, patent applications to the European Patent Office (EPO) from 1977-2004 are used and linked to 44 industries (NACE Rev. 1.1) by application of the ISI-SPRU-OST IPC-industry concordance by means of fractional counting and inventor location. Moreover, we merge patent data with OECD STAN industry indicators and the KOF index. First, we contribute with a detailed theoretical and empirical review. Second, we contribute to the discussion with descriptive analyses of the linkages between trade openness and European patents activity. Therefore, we construct sectoral and national aggregates. We explicitly focus on European countries due to the home bias in EPO patenting and because of large scale reforms liberalizing trade and entry within the time period considered. This version does not yet contain regression analyses results.