The (anti-)competitive effect of IPRs

ABSTRACT

We test whether intellectual property rights (IPRs) foster or hinder innovation by estimating IV structural equations for a large sample of Swiss firms. We find that better appropriability conditions at the industry level raise the number of competitors. However, conditional on the given industry structure, individual firms face fewer competitors, if they actually use IPRs. The further impact of fewer competitors is to raise R&D, when initial competition is strong, but to reduce it, when initial competition is weak (‘inverted U’).

KEYWORDS:

• Patents
• innovation
• competition
• simultaneous system

JEL CLASSIFICATION:

• O31
• O32
• O33
• O34

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Kamien and Schwartz (1976), Aghion et al. (2005).

² Lerner (2009), Bessen and Hunt (2007).

³ The surveys are available from www.kof.ethz.ch.

⁴ We do not apply lagged variables, because of lacking information on the accurate timing of events (e.g., for R&D to yield innovations), little variation over time of the ordinal endogenous variables, and the considerable loss of observations due to the unbalanced panel.

⁵ Peneder (2010).