Patents and Innovation in Economic History

Posted on February 8, 2016 by Nicholas Gruen
Posted in Economics and public policy, Innovation

This is commonsense, but fortunately less crude economic methodology than has been pursued hitherto seems to be uncovering it:

Abstract:

A strong tradition in economic history, which primarily relies on qualitative evidence and statistical correlations, has emphasized the importance of patents as a primary driver of innovation. Recent improvements in empirical methodology - through the creation of new data sets and advances in identification - have produced research that challenges this traditional view. The findings of this literature provide a more nuanced view of the effects of intellectual property, and suggest that when patent rights have been too broad or strong, they have actually discouraged innovation. This paper summarizes the major results from this research and presents open questions.

Author: Petra Moser

1 Comments

  1. Nicholas Gruen
    February 8, 2016

    No sooner had I posted this than I came across the lame exercise below. Note it's hardly surprising that start-ups with patents do better than others. 1. That suggests they're both better funded and may have better technology. 2. If the hold up rights in patents have a net effect of holding up innovation in general, it's kind of obvious that those with hold up rights will be benefiting from them. Not something that at least the abstract considers though it suggests its results question the need for patent reform.

    The Bright Side of Patents by Joan Farre-Mensa, Deepak Hegde, Alexander Ljungqvist - #21959 (LE PR)

    Abstract:

    Motivated by concerns that the patent system is hindering innovation, particularly for small inventors, this study investigates the bright side of patents. We examine whether patents help startups grow and succeed using detailed micro data on all patent applications filed by startups at the U.S. Patent and Trademark Office (USPTO) since 2001 and approved or rejected before 2014. We leverage the fact that patent applications are assigned quasi-randomly to USPTO examiners and instrument for the probability that an application is approved with individual examiners' historical approval rates. We find that patent approvals help startups create jobs, grow their sales, innovate, and reward their investors. Exogenous delays in the patent examination process significantly reduce firm growth, job creation, and innovation, even when a firm's patent application is eventually approved. Our results suggest that patents act as a catalyst that sets startups on a growth path by facilitating their access to capital. Proposals for patent reform should consider these benefits of patents alongside their potential costs.

    http://papers.nber.org/papers/W21959?utm_campaign=ntw&utm_medium=email&utm_source=ntw