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Market Power, Governance and Innovation: OECD Evidence

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  • Ugur, Mehmet

Abstract

The aim of this paper is to investigate the relationship between market power, governance and patenting activity in a sample of 25 OECD countries from 1988-2007. Controlling for a wide range of innovation predictors, we report that governance quality is related positively with patenting activity in the full sample and in samples of countries with higher-than-average per-capita GDP, governance scores and economic openness. Secondly, the relationship between market power and innovation has a U-shape in the full sample, but inverted-U shape in split samples. Third, when interacted with governance, market power tends to have an offsetting effect that weakens the positive relationship between governance and innovation. These findings are robust to a range of control variables such as per-capita GDP, income inequality, depth of equity markets, labour share in national income, economic globalization and military expenditures. Our findings indicate that governance is a significant factor that explain innovation and that blanket statements about the relationship between competition and innovation as well as the kind of reforms necessary to foster innovation can be misleading.

Suggested Citation

  • Ugur, Mehmet, 2012. "Market Power, Governance and Innovation: OECD Evidence," MPRA Paper 44141, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:44141
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    File URL: https://mpra.ub.uni-muenchen.de/44141/1/MPRA_paper_44141.pdf
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    Keywords

    Economic governance; innovation; patenting; market power;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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