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Innovating Like China: a Theory of Stage-Dependent Intellectual Property Rights

Angus Chu (), Guido Cozzi () and Silvia Galli ()

No 2011_14, Working Papers from Durham University Business School

Abstract: Inspired by the Chinese experience, we develop a Schumpeterian growth model of distance to frontier in which economic growth in the developing country is driven by domestic innovation as well as imitation and transfer of foreign technologies through foreign direct investment. We show that optimal intellectual property rights (IPR) protection is stage-dependent. At an early stage of development, the country implements weak IPR protection to facilitate imitation. At a later stage of development, the country implements strong IPR protection to encourage domestic innovation. We also calibrate the model to aggregate data of the Chinese economy to simulate the optimal path of patent strength, which is increasing as the country evolves towards the world technology frontier, and this dynamic pattern is consistent with the actual evolution of the patent system in China. Furthermore, we provide empirical evidence based on a dynamic panel regression to support the key mechanism in our theoretical model.

Keywords: economic growth; stage-dependent intellectual property rights (search for similar items in EconPapers)
JEL-codes: O31 O34 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ino and nep-tra
Date: 2011-11-26
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