Patents, Competition, and Firms' Innovation Incentives

Pilar Beneito, Mar�a Engracia Rochina-Barrachina and Amparo Sanchis-Llopis
Authors registered in the RePEc Author Service: Maria Engracia Rochina Barrachina

Industry and Innovation, 2014, vol. 21, issue 4, 285-309

Abstract: This paper presents fresh evidence on the interaction between industrial property rights (patents) and competition, and their joint effect on firms' innovation. We use panel data of Spanish manufacturing firms for 1990-2006, as well as external information on European Patent Office and US Patent Office patent counts. We construct a new synthetic measure of competition and estimate the impact of patents on this measure at the industry level. Then, the effect of industry-wide competition and patenting on firms' innovation is estimated at the firm level. Our results suggest that patents reduce the level of competition in the industry, whereas the effect of competition on innovation varies with the type of innovation indicator. Thus, by lowering competition, patents in an industry exert an indirect effect on innovation besides their direct effect. In addition, interaction effects between patents and competition indicate that patents soften the impact of competition changes on firms' innovation.

Date: 2014
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Working Paper: Patents, competition and firms’ innovation incentives (2012)
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DOI: 10.1080/13662716.2014.934546

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