Does a Stronger Patent System Stimulate More R&D? Yes, in Firms That Rely on Patents as an Appropriation Mechanism

30 Pages Posted: 13 Apr 2022 Last revised: 14 Apr 2022

See all articles by Pere Arque-Castells

Pere Arque-Castells

University of Groningen (Innovation Management and Strategy)

Date Written: March 18, 2022

Abstract

We propose a novel empirical strategy for detecting the potential effects of patent reforms on R&D investments. Our strategy builds on the insight that there is great variation in the extent to which firms rely on patents as an appropriation mechanism. Increases in patent protection should benefit those firms that rely on patents disproportionately more. We apply such insight by combining measures of industry reliance on patent protection (IRPP) from seminal innovation surveys with the establishment of the U.S. Court of Appeals for the Federal Circuit (CAFC) in 1982, the focal pro-patent reform of interest. Using a difference-in-differences approach, we find a positive effect of stronger patent protection on the R&D investments of firms with greater reliance on patent protection. Such effect is economically significant and only arises in the post-CAFC period for firms located in regional circuits that experienced high increases in patent protection.

Keywords: R&D, Patents, Enforcement, Patent Law, Innovation

JEL Classification: O31, O34

Suggested Citation

Arqué Castells, Pere, Does a Stronger Patent System Stimulate More R&D? Yes, in Firms That Rely on Patents as an Appropriation Mechanism (March 18, 2022). Available at SSRN: https://ssrn.com/abstract=4061147 or http://dx.doi.org/10.2139/ssrn.4061147

Pere Arqué Castells (Contact Author)

University of Groningen (Innovation Management and Strategy) ( email )

Nettelbosje 2
Innovation Management and Strategy
Groningen, 9747 AE
Netherlands

HOME PAGE: http://www.arque-castells.com

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