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Innovating Like China: a Theory of Stage-Dependent Intellectual Property Rights

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  • Angus C. Chu

    () (Durham Business School)

  • Guido Cozzi

    () (Durham Business School)

  • Silvia Galli

    (Hull University Business School)

Abstract

Inspired by the Chinese experience, we develop a Schumpeterian growth model of distance to frontier in which economic growth in the developing country is driven by domestic innovation as well as imitation and transfer of foreign technologies through foreign direct investment. We show that optimal intellectual property rights (IPR) protection is stage-dependent. At an early stage of development, the country implements weak IPR protection to facilitate imitation. At a later stage of development, the country implements strong IPR protection to encourage domestic innovation. We also calibrate the model to aggregate data of the Chinese economy to simulate the optimal path of patent strength, which is increasing as the country evolves towards the world technology frontier, and this dynamic pattern is consistent with the actual evolution of the patent system in China. Furthermore, we provide empirical evidence based on a dynamic panel regression to support the key mechanism in our theoretical model.

Suggested Citation

  • Angus C. Chu & Guido Cozzi & Silvia Galli, 2011. "Innovating Like China: a Theory of Stage-Dependent Intellectual Property Rights," Working Papers 2011_14, Durham University Business School.
  • Handle: RePEc:dur:durham:2011_14
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    1. repec:bla:reviec:v:25:y:2017:i:3:p:626-648 is not listed on IDEAS
    2. Chu, Angus C. & Cozzi, Guido & Pan, Shiyuan & Zhang, Mengbo, 2016. "Do Stronger Patents Stimulate or Stifle Innovation? The Crucial Role of Financial Development," MPRA Paper 73630, University Library of Munich, Germany.
    3. Alireza Naghavi & Shin-Kun Peng & Yingyi Tsai, 2017. "Relationship-specific Investments and Intellectual Property Rights Enforcement with Heterogeneous Suppliers," Review of International Economics, Wiley Blackwell, pages 626-648.
    4. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2014. "Stage-dependent intellectual property rights," Journal of Development Economics, Elsevier, pages 239-249.
    5. Kamal Saggi, 2016. "Trade, Intellectual Property Rights, and the World Trade Organization," Vanderbilt University Department of Economics Working Papers 16-00014, Vanderbilt University Department of Economics.
    6. Tatsuro Iwaisako, 2012. "Welfare effects of patent protection and productive public services: why do developing countries prefer weaker patent protection?," Discussion Papers in Economics and Business 12-19, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    7. Bharat Diwakar & Gilad Sorek, 2015. "Economic Development and Stage-Dependent IPR," Auburn Economics Working Paper Series auwp2015-16, Department of Economics, Auburn University.
    8. Saito, Yuki, 2017. "Effects of patent protection on economic growth and welfare in a two-R&D-sector economy," Economic Modelling, Elsevier, pages 124-129.
    9. Popov, V., 2011. "Do We Need to Protect Intellectual Property Rights?," Journal of the New Economic Association, New Economic Association, pages 107-126.
    10. Tian, Xian-Liang, 2017. "Sector-specific IPR protection to overcome technology-skill mismatch in South? A simple model," Mathematical Social Sciences, Elsevier, pages 44-51.
    11. Iwaisako, Tatsuro, 2013. "Welfare effects of patent protection and productive public services: Why do developing countries prefer weaker patent protection?," Economics Letters, Elsevier, pages 478-481.
    12. Jess Benhabib & Jesse Perla & Christopher Tonetti, 2017. "Reconciling Models of Diffusion and Innovation: A Theory of the Productivity Distribution and Technology Frontier," NBER Working Papers 23095, National Bureau of Economic Research, Inc.
    13. Bharat Diwakar & Gilad Sorek & Michael Stern, 2017. "Patents and Growth in OLG Economy with Physical Capital," Auburn Economics Working Paper Series auwp2017-06, Department of Economics, Auburn University.
    14. Dai, Darong & Shen, Kunrong, 2011. "A New Exploration of Optimal IPR Protection and International Policy Cooperation," MPRA Paper 40039, University Library of Munich, Germany.
    15. Gurrieri, Antonia Rosa, 2013. "Networking entrepreneurs," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 47(C), pages 193-204.
    16. Suzuki, Keishun, 2014. "Southern Innovation and Foreign Direct Investment," MPRA Paper 57054, University Library of Munich, Germany.
    17. Popov, V., 2011. "Do We Need to Protect Intellectual Property Rights?," Journal of the New Economic Association, New Economic Association, pages 107-126.

    More about this item

    Keywords

    economic growth; stage-dependent intellectual property rights;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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