IDEAS home Printed from https://ideas.repec.org/p/cuf/wpaper/589.html
   My bibliography  Save this paper

Patent Protection, Financial Development and Economic Growth

Author

Listed:
  • Shiyuan Pan

    (Center for Research of Private Economy and School of Economics, Zhejiang University)

  • Mengbo Zhang

    (School of Economics, Zhejiang University)

  • Heng-fu Zou

    (Central University of Finance and Economics CEMA)

Abstract

This paper theoretically and empirically investigates the effects of patent protection on innovation and economic growth by looking at the interaction between patent system and financial system. On the one hand, patent protection accelerates economic growth through enhancing the value of innovation. On the other hand, it lowers the demand for capital by increasing the price, thereby weakening the learning-by-doing effect and raising the cost of production. It follows, in turn, patent protection stifles innovation. As a consequence, a non-monotonic relationship between patents and economic growth could be seen. In addition, the degree of patent protection that maximizes the growth rate is decreasing with the degree of financial development, when the interaction between patent system and financial system is considered. Our cross-section and panel regressions support our theoretical results.

Suggested Citation

  • Shiyuan Pan & Mengbo Zhang & Heng-fu Zou, 2011. "Patent Protection, Financial Development and Economic Growth," CEMA Working Papers 589, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:589
    as

    Download full text from publisher

    File URL: http://down.aefweb.net/WorkingPapers/w589.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Gould, David M. & Gruben, William C., 1996. "The role of intellectual property rights in economic growth," Journal of Development Economics, Elsevier, vol. 48(2), pages 323-350, March.
    3. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    4. Kortum, Samuel & Lerner, Josh, 1998. "Stronger protection or technological revolution: what is behind the recent surge in patenting?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 247-304, June.
    5. Kwan, Yum K. & Lai, Edwin L. -C., 2003. "Intellectual property rights protection and endogenous economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 27(5), pages 853-873, March.
    6. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    7. Josh Lerner, 2009. "The Empirical Impact of Intellectual Property Rights on Innovation: Puzzles and Clues," American Economic Review, American Economic Association, vol. 99(2), pages 343-348, May.
    8. Schneider, Patricia Higino, 2005. "International trade, economic growth and intellectual property rights: A panel data study of developed and developing countries," Journal of Development Economics, Elsevier, vol. 78(2), pages 529-547, December.
    9. Jaffe, Adam B., 2000. "The U.S. patent system in transition: policy innovation and the innovation process," Research Policy, Elsevier, vol. 29(4-5), pages 531-557, April.
    10. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    11. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2012. "Does intellectual monopoly stimulate or stifle innovation?," European Economic Review, Elsevier, vol. 56(4), pages 727-746.
    12. Rod Falvey & Neil Foster & David Greenaway, 2006. "Intellectual Property Rights and Economic Growth," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 700-719, November.
    13. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
    14. Furukawa, Yuichi, 2010. "Intellectual property protection and innovation: an inverted-U relationship," Economics Letters, Elsevier, vol. 109(2), pages 99-101, November.
    15. Sunil Kanwar & Robert Evenson, 2003. "Does intellectual property protection spur technological change?," Oxford Economic Papers, Oxford University Press, vol. 55(2), pages 235-264, April.
    16. Park, Walter G., 2008. "International patent protection: 1960-2005," Research Policy, Elsevier, vol. 37(4), pages 761-766, May.
    17. Keith E. Maskus, 2000. "Intellectual Property Rights in the Global Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 99, April.
    18. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    19. Peter L. Rousseau & Paul Wachtel, 2005. "Economic Growth and Financial Depth: Is the Relationship Extinct Already?," Working Papers 05-15, New York University, Leonard N. Stern School of Business, Department of Economics.
    20. Ted O'Donoghue & Josef Zweimueller, 2004. "Patents in a Model of Endogenous Growth," Journal of Economic Growth, Springer, vol. 9(1), pages 81-123, March.
    21. Walter G. Park & Juan Carlos Ginarte, 1997. "Intellectual Property Rights And Economic Growth," Contemporary Economic Policy, Western Economic Association International, vol. 15(3), pages 51-61, July.
    22. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    23. Furukawa, Yuichi, 2007. "The protection of intellectual property rights and endogenous growth: Is stronger always better?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3644-3670, November.
    24. Ginarte, Juan C. & Park, Walter G., 1997. "Determinants of patent rights: A cross-national study," Research Policy, Elsevier, vol. 26(3), pages 283-301, October.
    25. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    26. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2010. "Financial Institutions and Markets across Countries and over Time: The Updated Financial Development and Structure Database," The World Bank Economic Review, World Bank, vol. 24(1), pages 77-92, January.
    27. Futagami, Koichi & Iwaisako, Tatsuro, 2007. "Dynamic analysis of patent policy in an endogenous growth model," Journal of Economic Theory, Elsevier, vol. 132(1), pages 306-334, January.
    28. Sakakibara, Mariko & Branstetter, Lee, 2001. "Do Stronger Patents Induce More Innovation? Evidence from the 1988 Japanese Patent Law Reforms," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 77-100, Spring.
    29. Gerard Llobet & Javier Suarez, 2010. "Entrepreneurial Innovation, Patent Protection and Industry Dynamics," Working Papers wp2010_1001, CEMFI.
    30. Varsakelis, Nikos C., 2001. "The impact of patent protection, economy openness and national culture on R&D investment: a cross-country empirical investigation," Research Policy, Elsevier, vol. 30(7), pages 1059-1068, August.
    31. Yi Qian, 2007. "Do National Patent Laws Stimulate Domestic Innovation in a Global Patenting Environment? A Cross-Country Analysis of Pharmaceutical Patent Protection, 1978-2002," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 436-453, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pan, Shiyuan & Zhang, Mengbo & Zou, Heng-Fu, 2018. "Status Preference And The Effects Of Patent Protection: Theory And Evidence," Macroeconomic Dynamics, Cambridge University Press, vol. 22(4), pages 837-863, June.
    2. Hudson, John & Minea, Alexandru, 2013. "Innovation, Intellectual Property Rights, and Economic Development: A Unified Empirical Investigation," World Development, Elsevier, vol. 46(C), pages 66-78.
    3. Pamela J. Smith & Sebastian J. Anti, 2022. "How does TRIPs compliance affect the economic growth of developing countries? Application of the Synthetic Control method," The World Economy, Wiley Blackwell, vol. 45(12), pages 3873-3906, December.
    4. Neves, Pedro Cunha & Afonso, Oscar & Silva, Diana & Sochirca, Elena, 2021. "The link between intellectual property rights, innovation, and growth: A meta-analysis," Economic Modelling, Elsevier, vol. 97(C), pages 196-209.
    5. Shiyuan Pan & Mengbo Zhang & Heng-fu Zou, 2013. "The Effects of Patent Protection: A Growth Model with Status Preference," CEMA Working Papers 574, China Economics and Management Academy, Central University of Finance and Economics.
    6. Sharma, Abhijit & Sousa, Cristina & Woodward, Richard, 2022. "Determinants of innovation outcomes: The role of institutional quality," Technovation, Elsevier, vol. 118(C).
    7. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2014. "Stage-dependent intellectual property rights," Journal of Development Economics, Elsevier, vol. 106(C), pages 239-249.
    8. Angus C. Chu, 2024. "Macroeconomic effects of intellectual property rights: an updated survey," Chapters, in: Walter G. Park (ed.), Handbook of Innovation and Intellectual Property Rights, chapter 2, pages 13-26, Edward Elgar Publishing.
    9. Keiichi Kishi, 2014. "A patentability requirement and industries targeted by R&D," Discussion Papers in Economics and Business 14-27, Osaka University, Graduate School of Economics.
    10. Chu, Angus C. & Leung, Charles K.Y. & Tang, Edward, 2012. "Intellectual property rights, technical progress and the volatility of economic growth," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 749-756.
    11. Angus C. Chu, 2022. "Patent policy and economic growth: A survey," Manchester School, University of Manchester, vol. 90(2), pages 237-254, March.
    12. Rudra Narayan Kushwaha & Taniya Ghosh, 2023. "The Effects of population growth on patents and economic growth dynamics," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2023-05, Indira Gandhi Institute of Development Research, Mumbai, India.
    13. Angus C. Chu, 2009. "Macroeconomic Effects of Intellectual Property Rights: A Survey," IEAS Working Paper : academic research 09-A007, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    14. Cysne, Rubens P. & Turchick, David, 2012. "Intellectual property rights protection and endogenous economic growth revisited," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 851-861.
    15. Philippe Aghion & Peter Howitt & Susanne Prantl, 2015. "Patent rights, product market reforms, and innovation," Journal of Economic Growth, Springer, vol. 20(3), pages 223-262, September.
    16. Abdin, Joynal & Sharma, Abhijit & Trivedi, Rohit & Wang, Chengang, 2024. "Financing constraints, intellectual property rights protection and incremental innovation: Evidence from transition economy firms," Technological Forecasting and Social Change, Elsevier, vol. 198(C).
    17. Angus C. Chu & Guido Cozzi & Haichao Fan & Shiyuan Pan & Mengbo Zhang, 2020. "Do Stronger Patents Stimulate or Stifle Innovation? The Crucial Role of Financial Development," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(5), pages 1305-1322, August.
    18. Ang, James B., 2010. "Financial Reforms, Patent Protection, and Knowledge Accumulation in India," World Development, Elsevier, vol. 38(8), pages 1070-1081, August.
    19. Zhang, Yufei & Wang, Li & He, Tengjiao, 2024. "Can IP tribunals increase firm patent applications?—Empirical evidence from China," China Economic Review, Elsevier, vol. 87(C).
    20. Kim, Yee Kyoung & Lee, Keun & Park, Walter G. & Choo, Kineung, 2012. "Appropriate intellectual property protection and economic growth in countries at different levels of development," Research Policy, Elsevier, vol. 41(2), pages 358-375.

    More about this item

    Keywords

    Patent Protection; Financial development; Innovation; Economic Growth;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cuf:wpaper:589. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Qiang Gao (email available below). General contact details of provider: https://edirc.repec.org/data/emcufcn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.