Do patent rights matter? 40 years of innovation, complexity and productivity

Cassandra Sweet and Dalibor Eterovic

World Development, 2019, vol. 115, issue C, 78-93

Abstract: Does the rigorous protection of patents advance or retard economic development? Two decades ago, a new global standard of intellectual property swept across developing and industrialized nations through the implementation of the WTO’s TRIPS Agreement. Many years later, the issue of patent rights remains contentious. In this paper, we focus on the effects of patent rights systems on total factor productivity growth, using dynamic panel regression analysis for 70 countries from 1965 to 2009. We show that the effects of stronger or more rigorous patent systems are insignificant for productivity growth in both developing and industrialized countries. Why does the strength of patents appear to have no impact on productivity? Classic economic theory suggests that stronger patent systems incentive innovative output with important spill-over effects for productivity and growth. We offer an alternative explanation using data from the Economic Complexity Index. We find that while patents rights are increasingly irrelevant to productivity, the relationship between economic complexity and productivity is highly positive and significant. Our results are consistent with the contributions of the absorptive capacity theory in that they suggest it is not the discovery and ownership of novel products and processes at the innovative frontier that induces productive growth, but the ability to adapt, replicate and diffuse along the international productive chain.

Keywords: Productivity; Innovation; Development; Patents; Intellectual property rights; Economic complexity (search for similar items in EconPapers)
JEL-codes: I12 P14 Q55 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:115:y:2019:i:c:p:78-93

DOI: 10.1016/j.worlddev.2018.10.009

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