The Impact of Patent Protection and Financial Development on Industrial R&D

62 Pages Posted: 6 Dec 2018

See all articles by Keith E. Maskus

Keith E. Maskus

University of Colorado at Boulder - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Sahar Milani

St. Lawrence University

Rebecca M. Neumann

University of Wisconsin - Milwaukee

Date Written: July 2018

Abstract

Stronger protection of patent rights is thought to spur innovation through securing returns to R&D investments. Those investments must be financed, however, suggesting that the responsiveness of R&D to patent reforms varies with financial development levels. We examine the joint impact of domestic and international financial-market development and patent protection on R&D intensities in 22 manufacturing industries in 20 OECD countries for the period 1990-2009. We show that stronger patent rights increase R&D intensities in patent-intensive industries, accounting for the need for external financing and the amount of tangible assets. The primary impact varies across types of financial development: patent protection raises R&D in high-patent industries where countries have more limited equity and credit markets. In contrast, in countries with more developed bond markets industry R&D is more sensitive to patent rights. Interestingly, patent rights in countries that are more exposed to foreign direct investment increase R&D intensities at all levels of financial development.

Keywords: R&D; financial development; patent protection

JEL Classification: F36, G10, G15, O16, O30, P14

Suggested Citation

Maskus, Keith E. and Milani, Sahar and Neumann, Rebecca M., The Impact of Patent Protection and Financial Development on Industrial R&D (July 2018). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2018/37, Available at SSRN: https://ssrn.com/abstract=3293861 or http://dx.doi.org/10.2139/ssrn.3293861

Keith E. Maskus (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-7588 (Phone)
303-492-8960 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Sahar Milani

St. Lawrence University ( email )

One Romoda Drive
Canton, NY 13617
United States

Rebecca M. Neumann

University of Wisconsin - Milwaukee ( email )

Bolton Hall 810
P.O. Box 413
Milwaukee, WI 53211
United States
414-229-4347 (Phone)
414-229-3860 (Fax)

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