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Patent rights, product market reforms, and innovation

Philippe Aghion, Peter Howitt and Susanne Prantl

Scholarly Articles from Harvard University Department of Economics

Abstract: In this paper, we provide empirical evidence to the effect that strong patent rights may complement competition-increasing product market reforms in fostering innovation. First, we find that the product market reform induced by the large-scale internal market reform of the European Union in 1992 enhanced, on average, innovative investments in manufacturing industries of countries with strong patent rights since the pre-sample period, but not so in industries of countries with weaker patent rights. Second, the positive response to the product market reform is more pronounced in industries where, in general, innovators tend to value patent protection higher than in other industries, except for the manufacture of electrical and optical equipment. The observed complementarity between competition and patent protection can be rationalized using a Schumpeterian growth model with step-by-step innovation. In such a model, better patent protection prolongs the period over which a firm that successfully escapes competition by innovating, actually enjoys higher monopoly rents from its technological upgrade.

Date: 2015
New Economics Papers: this item is included in nep-com, nep-cse, nep-ino, nep-ipr, nep-knm, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

Published in Journal of Economic Growth

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Journal Article: Patent rights, product market reforms, and innovation (2015) Downloads
Working Paper: Patent rights, product market reforms, and innovation (2015) Downloads
Working Paper: Patent Rights, Product Market Reforms, and Innovation (2013) Downloads
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