Entry Barriers, Property Rights, and R&D Activities: Evidence from OECD Countries

Abstract

Despite the theoretical argument and empirical evidence that R&D is essential for technological progress and economic growth, there are large variations in R&D expenditures across countries and industries, even among OECD countries. What institutional factors may be responsible for such variations? We focus on two types of institutions: entry regulation and intellectual property rights protection, and examine whether these two institutions exert differential effects on R&D activities across industries. The results show that countries with lower entry cost and better intellectual property rights protection tend to invest more in R&D, especially in industries with high natural entry rate and high R&D intensity. Various robustness checks confirm that the results are not due to reverse causality, omitted variables or outliers.

Keywords: Entry, Regulation, Market Power, Property Rights, R&D

JEL Classification: K2, O3