Patent Incentives: Returns to Patenting and the Inducement for Research & Development Executive Summary

8 Pages Posted: 5 Jan 2016

See all articles by Ashish Arora

Ashish Arora

Duke University - Fuqua School of Business; National Bureau of Economics Research; Duke Innovation & Entrepreneurship Initiative

Suma Athreye

Brunel University London - Brunel Business School

Date Written: November 1, 2012


The UK has one of the oldest intellectual property rights (IPR) regimes in the world and yet policy makers and Intellectual Property Office (IPO) officials would be hard pressed to say what exactly the private returns to patenting are for firms operating in the UK. As more and more countries around the world embrace stronger IPR regimes, precise estimates of the returns to patenting and comparison of these benefits with the costs incurred in the enforcement of patents are likely to become important as an evidence base for policy evaluation.

In this report, we argue that patenting allows firms a price premium in new product revenue thus increasing profitability. At the same time this increased profitability acts as an inducement to research and development (R&D) expenditures made by the firm. Thus, we contribute to two literature streams viz. the literature on the value of patents and the literature on the effect of patents on (R&D) expenditures.

To make the assessment empirically requires estimates of:

the value of new product / service revenue firms achieve and their (R&D) expenditure (from the innovation survey)

the effectiveness of patents in exploiting each firms technology in its market (self assessed within the innovation survey)

the ‘propensity to patent’ a term used to capture the proportion of innovations which firms choose to patent. Data on this are currently unavailable for the UK and we were forced to rely on imputation from the US (CMU) surveys to establish a range for the patent propensity. Thus, we could make only broad predictions (within a range) on the extent of premium and the inducement for (R&D).

Suggested Citation

Arora, Ashish and Athreye, Suma S., Patent Incentives: Returns to Patenting and the Inducement for Research & Development Executive Summary (November 1, 2012). Intellectual Property Office Research Paper Forthcoming 2012/20, Available at SSRN: or

Ashish Arora (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

National Bureau of Economics Research

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Suma S. Athreye

Brunel University London - Brunel Business School ( email )

Kingston Lane
Eastern Gateway Building
Uxbridge, Middlesex UB8 3PH
United Kingdom

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