Intellectual Property Rights Protection, Investment, and Firm Growth

80 Pages Posted: 22 Nov 2017 Last revised: 23 Sep 2022

Date Written: September 22, 2022

Abstract

This paper investigates whether strong protection of intellectual property rights (IPR) fosters corporate investment and spurs firm growth. My identification strategy exploits the adoption and subsequent invalidation of laws that prohibit the duplication of manufactured products using an efficient reverse engineering process. The results show increases in physical and intangible capital investments and sales and employment growth after the laws’ adoption, followed by significant decreases when the laws are reversed. More pronounced effects for firms in less concentrated industries and higher firm profitability suggest that strong IPR protection incentivizes investment and growth by decreasing the competitive threat of product imitation.

Keywords: Intellectual property rights protection, Physical and intangible capital investments, Sales and employment growth, Product market competition

JEL Classification: G32, K22, O31, O32, O34

Suggested Citation

Guernsey, Scott, Intellectual Property Rights Protection, Investment, and Firm Growth (September 22, 2022). Available at SSRN: https://ssrn.com/abstract=3074622 or http://dx.doi.org/10.2139/ssrn.3074622

Scott Guernsey (Contact Author)

University of Tennessee ( email )

Haslam College of Business
Knoxville, TN 37996
United States

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