Competition and Innovation

Abstract

Which kind of intellectual property regime is more favorable to innovation: one that enforces patents or one that does not? Economic theory is unable to answer this question, as valid arguments can be made both for and against patents; hence we must turn to empirical evidence. In this paper, we review empirical evidence gathered by other researchers and add new evidence of our own. We conclude that the evidence suggests that patents do not promote innovation, but instead retard it.

Keywords: innovation and economic growth, new technology, US intellectual property rights, patent reform, monopoly power, American labor productivity, business competition in the United States, government policy

JEL Classification: D40, D42, O30, O31, O32, O34, O38