Cross Country Differences in Patent Propensity: A Firm-Level Investigation

We investigate cross country differences in patent propensity in the European Union using the European Patent Office database and the database on European firms AMADEUS. We ask how much of the differences in patent propensity at the aggregate level can be accounted for by a more disaggregate analysis. First, we find that the large and persistent differences between countries cannot be explained by sectoral composition only: patent propensity differs substantially even within sectors. Second, country effects play a role in determining the probability that a firm engages in innovative activity, even after controlling for firms characteristics; on the contrary, they are not significant for the amount of innovative output of those firms that do engage in patenting. This indicates that some countries might be more conducive for firms to undertake innovation activity, but that, once this is done, innovative firms are not sensitive to the home country effect.