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When does patent protection spur cumulative research within firms?

Author

Listed:
  • Ashish Arora
  • Sharon Belenzon
  • Matt Marx
  • Dror Shvadron

Abstract

We estimate the effect of patent protection on follow-on investments in corporate scientific research. We exploit a new method for identifying an exogenous reduction in the protection a granted patent provides. Using data on public, research-active firms between 1990 and 2015, we find that firms respond to a decrease in patent protection by reducing follow-on research, as measured by a drop in internal citations to an associated scientific article. We study this effect across firms with varying commercialization capabilities and across varying thickness levels of markets for technology. We find that the effect is stronger in technologies where patents are traded less frequently. Our findings are consistent with a stylized model whereby patent protection is a strategic substitute for commercialization capability. Our results imply that stronger patents encourage follow-on research, but also shift the locus of research from big firms toward smaller firms and startups (JEL D22, O31, O32, O34).

Suggested Citation

  • Ashish Arora & Sharon Belenzon & Matt Marx & Dror Shvadron, 2024. "When does patent protection spur cumulative research within firms?," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 40(3), pages 694-728.
    • Handle: RePEc:oup:jleorg:v:40:y:2024:i:3:p:694-728.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewad006
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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