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Do Patents Lead to Market Concentration and Excess Profits?

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  • Padmashree Gehl Sampath
  • Walter Park

Abstract

Market concentration in technology intensive industries has been a subject of interest to both scholars and policy analysts. This paper provides a first empirical assessment on how the patenting system contributes to market concentration and the generation of economic rents in three key sectors – pharmaceuticals, chemicals and ICTs. Using data for US multinationals and their foreign affiliates on the one hand, and locally registered private and public companies in Brazil, India and China, we conclude that the concentration of patent ownership is found significantly to relate to market concentration in the USA. In developing countries such as Brazil, India, and China, a strengthening of patent rights has contributed to greater returns for affiliates of U.S. companies but has not stimulated their R&D intensity. The affiliates of U.S. multinationals have enjoyed greater profitability relative to their local competitors in Brazil, India, and China. The paper draws implications for the setting of intellectual property policy and offers suggestions on the role of competition policy in curbing market concentration and related effects on inequality and access.

Suggested Citation

  • Padmashree Gehl Sampath & Walter Park, 2019. "Do Patents Lead to Market Concentration and Excess Profits?," GDAE Working Papers 19-02, GDAE, Tufts University.
    • Handle: RePEc:dae:daepap:19-02
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    File URL: http://www.bu.edu/eci/files/2020/01/19-02_Sampath_Patents.pdf
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    References listed on IDEAS

    as
    1. Mark Duggan & Craig Garthwaite & Aparajita Goyal, 2016. "The Market Impacts of Pharmaceutical Product Patents in Developing Countries: Evidence from India," American Economic Review, American Economic Association, vol. 106(1), pages 99-135, January.
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    4. Jeff Thurk, 2013. "Market Effects of Patent Reform in the US Semiconductor Industry," 2013 Meeting Papers 1029, Society for Economic Dynamics.
    5. Margaret Kyle, 2016. "Competition Law, Intellectual Property, and the Pharmaceutical Sector," Post-Print hal-01448506, HAL.
    6. Walter G. Park & Douglas C. Lippoldt, 2008. "Technology Transfer and the Economic Implications of the Strengthening of Intellectual Property Rights in Developing Countries," OECD Trade Policy Papers 62, OECD Publishing.
    7. Jeanjean, François & Houngbonon, Georges Vivien, 2017. "Market structure and investment in the mobile industry," Information Economics and Policy, Elsevier, vol. 38(C), pages 12-22.
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    Cited by:

    1. Cai, Helen (Huifen) & Sarpong, David & Tang, Xiaoyun & Zhao, Guiqin, 2020. "Foreign patents surge and technology spillovers in China (1985–2009): Evidence from the patent and trade markets," Technological Forecasting and Social Change, Elsevier, vol. 151(C).

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