Patent Rights and Innovation by Small and Large Firms

49 Pages Posted: 24 Nov 2015

See all articles by Alberto Galasso

Alberto Galasso

University of Toronto - Rotman School of Management; University of Toronto - Strategic Management

Mark A. Schankerman

London School of Economics and Political Science; Centre for Economic Policy Research (CEPR)

Date Written: November 20, 2015

Abstract

This paper studies the causal impact of patents on subsequent innovation by the patent holder. The analysis is based on court invalidation of patents by the U.S. Court of Appeals for the Federal Circuit, and exploits the random allocation of judges to control for the endogeneity of the judicial decision. Patent invalidation leads to a 50 percent decrease in patenting by the patent holder, on average, but the impact depends critically on characteristics of the patentee and the competitive environment. The effect is entirely driven by small innovative firms in technology fields where they face many large incumbents. Invalidation of patents held by large firms does not change the intensity of their innovation but shifts the technological direction of their subsequent patenting.

Suggested Citation

Galasso, Alberto and Schankerman, Mark A., Patent Rights and Innovation by Small and Large Firms (November 20, 2015). Rotman School of Management Working Paper No. 2694725, Available at SSRN: https://ssrn.com/abstract=2694725 or http://dx.doi.org/10.2139/ssrn.2694725

Alberto Galasso (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/facbios/viewFac.asp?facultyID=alberto.galasso

University of Toronto - Strategic Management ( email )

105 St George Street
Toronto, ON M5S 1L2
Canada

Mark A. Schankerman

London School of Economics and Political Science ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7518 (Phone)
+44 20 7831 1840 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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