The Four Major Forms of IPRs, Innovation and Economic Development by Latecomers: Patents, Utility Models, Trademarks, and Industrial Designs

This paper argues that different types of IPRs are differentially important for innovation and firm growth at different stages of economic development, and that innovation policy should be tailored to take into account not only different stages of development and capabilities, but also sectoral heterogeneity. Strong or weak IPR protection is not the key issue for developing countries, and what matters for them to realize innovation and growth is not only the strength of IPRs but also the type of protection. The cross-country analyses and the experience of Korean firms suggest that the design and strength of intellectual property systems should be tailored to the indigenous technological capabilities of firms in order to best provide the appropriate incentives for innovation. The empirical analysis survey in this paper shows that at the early stage of development, firms’ sales growth is associated with utility models in the patent-driven path and with trademarks in the trademark-driven group. It is also confirmed that trademark-oriented industries tend to focus on the domestic market, while design-oriented industries tend to focus on global markets. In the later stage, not only patents but also designs and trademarks become important, especially for firms that go beyond the domestic market and target the global market. In sum, the key lessons for emerging or catching economies are that conventional patents are not the only form of IPR that can effectively promote innovation, and that in the early stages of development and in certain sectors, other IPRs such as trademarks and utility models can be an effective form of IPR to detect and promote imitation and/or innovation. The overall conclusion is that in developing countries, a nuanced approach to innovation policy, taking into account the country’s stage of development and sectoral diversity, works better.