Intellectual Property Rights Protection, Investment, and Firm Growth

83 Pages Posted: 22 Nov 2017 Last revised: 7 Sep 2023

Date Written: September 5, 2023


This paper examines whether strong intellectual property rights (IPR) protection fosters or deters corporate investment and firm growth. Exploiting the adoption and later nullification of state law that prohibits competitors from duplicating products using an efficient reverse engineering process, I find that physical and intangible capital expenditures and sales and employment growth rates increase following the law’s passage and decrease after a U.S. Supreme Court ruling overturns it. More pronounced effects for firms in less concentrated industries and increases in profitability suggest that strong IPR protection incentivizes innovation-driven investment and growth by reducing the competitive threat of product imitation.

Keywords: Intellectual property rights protection, Innovation, Physical and intangible capital investment, 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 5, 2023). Available at SSRN: or

Scott Guernsey (Contact Author)

University of Tennessee ( email )

Haslam College of Business
Knoxville, TN 37996
United States

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