Strategic Patenting and Software Innovation

Abstract:     
Strategic patenting is widely believed to raise the costs of innovating, especially in industries characterised by cumulative innovation. This paper studies the effects of strategic patenting on R&D, patenting and market value in the computer software industry. We focus on two key aspects: patent portfolio size which affects bargaining power in patent disputes, and the fragmentation of patent rights (.patent thickets.) which increases the transaction costs of enforcement. We develop a model that incorporates both effects, together with R&D spillovers. Using panel data for the period 1980- 99, we find evidence that both strategic patenting and R&D spillovers strongly affect innovation and market value of software firms.

Number of Pages in PDF File: 48

JEL Classification: L43, L86, O31, O32, O33, O34, O38

working papers series