Do Patents Lead to Market Concentration and Excess Profits?

Padmashree Gehl Sampath and Walter Park

No 19-02, GDAE Working Papers from GDAE, Tufts University

Abstract: Market concentration in technology intensive industries has been a subject of interest to both scholars and policy analysts. This paper provides a first empirical assessment on how the patenting system contributes to market concentration and the generation of economic rents in three key sectors – pharmaceuticals, chemicals and ICTs. Using data for US multinationals and their foreign affiliates on the one hand, and locally registered private and public companies in Brazil, India and China, we conclude that the concentration of patent ownership is found significantly to relate to market concentration in the USA. In developing countries such as Brazil, India, and China, a strengthening of patent rights has contributed to greater returns for affiliates of U.S. companies but has not stimulated their R&D intensity. The affiliates of U.S. multinationals have enjoyed greater profitability relative to their local competitors in Brazil, India, and China. The paper draws implications for the setting of intellectual property policy and offers suggestions on the role of competition policy in curbing market concentration and related effects on inequality and access.

Date: 2019-04
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