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Intellectual Property Regimes and Firm Structure

Author

Listed:
  • Sourav Bhattacharya
  • Pavel Chakraborty
  • Chirantan Chatterjee

Abstract

We use The Patents (Amendment) Act, 2002 in India as a quasi-natural experiment to identify the causal e¤ect of higher incentives for innovation on firm organizational features. We find that stronger intellectual property (IP) protection has a sharper impact on technologically advanced firms, i.e., firms that were a-priori above the industry median in terms of technology adoption. While there is an overall increase in managers' share of compensation, this increase is about 1.6-1.7% more for high-tech firms. This difference can be attributed to a larger increase in performance pay for high-tech firms. The reform also leads to a significant increase in number of managerial layers and number of divisions for high-tech firms relative to low-tech firms, but only the latter effect is correlated with the differential change in managerial compensation. Broadly, we demonstrate that stronger IP protection leads to an increase in both within-firm and between-firm wage inequality, with more robust evidence for between-firm inequality.

Suggested Citation

  • Sourav Bhattacharya & Pavel Chakraborty & Chirantan Chatterjee, 2018. "Intellectual Property Regimes and Firm Structure," Working Papers 240829812, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:240829812
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    References listed on IDEAS

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    More about this item

    Keywords

    Intellectual Property Regimes; High-tech and Low-tech firms; Managerial Com- pensation; Span of Control;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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