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Patent Rights, Product Market Reforms, and Innovation

  • Philippe Aghion
  • Peter Howitt
  • Susanne Prantl

Can patent protection and product market competition complement each other in enhancing incentives to innovate? In this paper, we address this question by investigating how innovation responses to a substantial policy initiative increasing product market competition interact with the strength of patent rights. We provide empirical evidence of innovation responding positively to the product market reform in industries of countries where patent rights are strong, not where these are weak. The positive response to the reform is more pronounced in industries in which innovators rely more on patenting than in other industries, and in which the scope for deterring entry through patenting is not too large. Our empirical findings are in line with step-by-step innovation models predicting that product market competition enhances innovation and, more importantly, that patent protection can complement competition in inducing innovation.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18854.

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Date of creation: Feb 2013
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Handle: RePEc:nbr:nberwo:18854
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  1. Park, Walter G., 2008. "International patent protection: 1960-2005," Research Policy, Elsevier, vol. 37(4), pages 761-766, May.
  2. Aghion, Philippe, et al, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 467-92, July.
  3. Lee G Branstetter & Raymond Fisman & C. Fritz Foley, 2006. "Do Stronger Intellectual Property Rights Increase International Technology Transfer? Empirical Evidence from U. S. Firm-Level Panel Data," The Quarterly Journal of Economics, MIT Press, vol. 121(1), pages 321-349, 02.
  4. Michele Boldrin & David K Levine, 2008. "Against Intellectual Monopoly," Levine's Bibliography 122247000000002371, UCLA Department of Economics.
  5. Petra Moser, 2003. "How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World Fairs," NBER Working Papers 9909, National Bureau of Economic Research, Inc.
  6. Bottasso, Anna & Sembenelli, Alessandro, 2001. "Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms," European Economic Review, Elsevier, vol. 45(1), pages 167-186, January.
  7. Georg Graevenitz & Stefan Wagner & Dietmar Harhoff, 2013. "Incidence and Growth of Patent Thickets: The Impact of Technological Opportunities and Complexity," Journal of Industrial Economics, Wiley Blackwell, vol. 61(3), pages 521-563, 09.
  8. Bronwyn H. Hall, 2004. "Exploring the Patent Explosion," NBER Working Papers 10605, National Bureau of Economic Research, Inc.
  9. Mary O'Mahony & Marcel P. Timmer, 2009. "Output, Input and Productivity Measures at the Industry Level: The EU KLEMS Database," Economic Journal, Royal Economic Society, vol. 119(538), pages F374-F403, 06.
  10. Josh Lerner, 2002. "Patent Protection and Innovation Over 150 Years," NBER Working Papers 8977, National Bureau of Economic Research, Inc.
  11. Graevenitz, Georg von & Wagner, Stefan & Harhoff, Dietmar, 2009. "How to measure patent thickets – a novel approach," Discussion Papers in Business Administration 10962, University of Munich, Munich School of Management.
  12. Maskus, Keith E. & Penubarti, Mohan, 1995. "How trade-related are intellectual property rights?," Journal of International Economics, Elsevier, vol. 39(3-4), pages 227-248, November.
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  14. Sakakibara, Mariko & Branstetter, Lee, 2001. "Do Stronger Patents Induce More Innovation? Evidence from the 1988 Japanese Patent Law Reforms," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 77-100, Spring.
  15. Daron Acemoglu & Ufuk Akcigit, 2012. "Intellectual Property Rights Policy, Competition And Innovation," Journal of the European Economic Association, European Economic Association, vol. 10(1), pages 1-42, 02.
  16. Hall, Bronwyn H & Jaffe, Adam B & Trajtenberg, Manuel, 2001. "The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools," CEPR Discussion Papers 3094, C.E.P.R. Discussion Papers.
  17. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, June.
  18. Josh Lerner, 2002. "150 Years of Patent Protection," American Economic Review, American Economic Association, vol. 92(2), pages 221-225, May.
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  20. Philippe Aghion & Peter Howitt, 2009. "The Economics of Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 9780262012638, June.
  21. Josh Lerner, 2009. "The Empirical Impact of Intellectual Property Rights on Innovation: Puzzles and Clues," American Economic Review, American Economic Association, vol. 99(2), pages 343-48, May.
  22. Harris, Christopher & Howitt, Peter & Vickers, John & Aghion, Philippe, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Scholarly Articles 12375013, Harvard University Department of Economics.
  23. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
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