How do Patent Laws Influence Innovation?

45 Pages Posted: 15 Sep 2006  

Petra Moser

Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

Studies of innovation have focused on the effects of patent laws on the number of innovations but ignored effects on the direction of technological change. This paper introduces a new data set of close to fifteen thousand innovations at the Crystal Palace World's Fair in 1851 and at the Centennial Exhibition in 1876 to examine the effects of patent laws on the direction of innovation. The paper tests the following argument: if innovative activity is motivated by expected profits, and if the effectiveness of patent protection varies across industries, then innovation in countries without patent laws should focus on industries where alternative mechanisms to protect intellectual property are effective. Analyses of exhibition data for twelve countries in 1851 and ten countries in 1876 indicate that inventors in countries without patent laws focus on a small set of industries where patents were less important, while innovation in countries with patent laws appears to be much more diversified. These findings suggest that patents help to determine the direction of technical change and that the adoption of patent laws in countries without such laws may alter existing patterns of comparative advantage across countries.

Keywords: Innovation, Patent Laws, Technical Change

Suggested Citation

Moser, Petra, How do Patent Laws Influence Innovation?. American Economic Review, Vol. 95, No. 4, September 2005 . Available at SSRN: https://ssrn.com/abstract=930243

Petra Moser (Contact Author)

Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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