Stage-Dependent Intellectual Property Rights

Chu, Angus C. and Cozzi, Guido and Galli, Silvia (2011): Stage-Dependent Intellectual Property Rights.

Abstract

Inspired by the Chinese experience, we develop a Schumpeterian growth model of distance to frontier in which economic growth in the developing country is driven by domestic innovation as well as imitation and transfer of foreign technologies through foreign direct investment. We show that optimal intellectual property rights (IPR) protection is stage-dependent. At an early stage of development, the country implements weak IPR protection to facilitate imitation. At a later stage of development, the country implements strong IPR protection to encourage domestic innovation. Therefore, the growth-maximizing and welfare-maximizing levels of patent strength increase as the country evolves towards the world technology frontier, and this dynamic pattern is consistent with the actual evolution of patent strength in China.

• Item Type: MPRA Paper
• Language: English
• Keywords: economic growth; stage-dependent intellectual property rights
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O34 - Intellectual Property and Intellectual Capital; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General

References

Acemoglu, D., Aghion, P., and Zilibotti, F., 2003. Vertical integration and distance to frontier. Journal of the European Economic Association, 1, 630-638.

Acemoglu, D., Aghion, P., and Zilibotti, F., 2006. Distance to frontier, selection, and economic growth. Journal of the European Economic Association, 4, 37-74.

Acemoglu, D., and Akcigit, U., 2012. Intellectual property rights policy, competition and innovation. Journal of the European Economic Association, 10, 1-42.

Aghion, P., Howitt, P., and Mayer-Foulkes, D., 2005. The effect of financial development on convergence: Theory and evidence. Quarterly Journal of Economics, 120, 173-222.

Aitken, B., and Harrison, A., 1999. Do domestic firms benefit from direct foreign investment? Evidence from Venezuela. American Economic Review, 89, 605-618.

Akiyama, T., and Furukawa, T., 2009. Intellectual property rights and appropriability of innovation. Economics Letters, 103, 138-141.

Allison, J., and Lin, L., 1999. The evolution of Chinese attitudes toward property rights in invention and discovery. University of Pennsylvania Journal of International Economic Law, 20, 735-791.

Benhabib, J., Perla, J., and Tonetti, C., 2012. Catch-up and fall-back through innovation and imitation. NBER Working Paper No. 18091.

Benhabib, J., and Spiegel, M., 2005. Human capital and technology diffusion. In Handbook of Economic Growth, edited by Aghion, P., and Durlauf, S., vol. 1., pp. 935-966. Elsevier.

Branstetter, L., Fisman, R., and Foley, C., 2006. Do stronger intellectual property rights increase international technology transfer? Empirical evidence from US firm-level panel data. Quarterly Journal of Economics, 121, 321-349.

Branstetter, L., and Saggi, K., 2011. Intellectual property rights, foreign direct investment and industrial development. Economic Journal, 121,1161-1191.

Chen, Y., and Puttitanun, T., 2005. Intellectual property rights and innovation in developing countries. Journal of Development Economics, 78, 474--493.

Chu, A., 2009. Effects of blocking patents on R&D: A quantitative DGE analysis. Journal of Economic Growth, 14, 55-78.

Chu, A., Cozzi, G., and Galli, S., 2012. Does intellectual monopoly stimulate or stifle innovation? European Economic Review, 56, 727-746.

Chu, A., Cozzi, G., and Galli, S., 2013. Theory and empirics of stage-dependent intellectual property rights. MPRA Paper No. 44663.

Cozzi, G., 2001. Inventing or spying? Implications for growth. Journal of Economic Growth, 6, 55-77.

Cozzi, G., and Spinesi, L., 2006. Intellectual appropriability, product differentiation, and growth. Macroeconomic Dynamics, 10, 39-55.

Davis, L., and Sener, F., 2012. Private patent protection in the theory of Schumpeterian growth. European Economic Review, 56, 1446-1460.

Dinopoulos, E., and Segerstrom, P., 2010. Intellectual property rights, multinational firms and economic growth. Journal of Development Economics, 92, 13-27.

Dinopoulos, E., and Syropoulos, C., 2007. Rent protection as a barrier to innovation and growth. Economic Theory, 32, 309-332.

Feldstein, M., 2011. China's five-year plan and global interest rates. Project Syndicate, March 29, 2011.

Furukawa, Y., 2007. The protection of intellectual property rights and endogenous growth: Is stronger always better? Journal of Economic Dynamics and Control, 31, 3644-3670.

Furukawa, Y., 2010. Intellectual property protection and innovation: An inverted-U relationship. Economics Letters, 109, 99-101.

Futagami, K., and Iwaisako, T., 2007. Dynamic analysis of patent policy in an endogenous growth model. Journal of Economic Theory, 132, 306-334.

Gersbach, H., Schneider, M., and Schneller, O., 2013. Basic research, openness, and convergence. Journal of Economic Growth, 18, 33-68.

Ginarte, J., and Park, W., 1997. Determinants of patent rights: A cross-national study. Research Policy, 26, 283-301.

Glass, A., and Saggi, K., 2002a. Licensing versus direct investment: Implications for economic growth. Journal of International Economics, 56, 131-153.

Glass, A., and Saggi, K., 2002b. Intellectual property rights and foreign direct investment. Journal of International Economics, 56, 387-410.

Glass, A., and Wu, X., 2007. Intellectual property rights and quality improvement. Journal of Development Economics, 82, 393-415.

Griffith, R., and Miller, H., 2011. Innovation in China: The rise of Chinese inventors in the production of knowledge. IFS Working Paper No. W11/15.

Grossman, G., and Helpman, E., 1991. Endogenous product cycles. Economic Journal, 101, 1214-1229.

Grossman, G., and Lai, E., 2004. International protection of intellectual property. American Economic Review, 94, 1635-1653.

Helpman, E., 1993. Innovation, imitation, and intellectual property rights. Econometrica, 61, 1247-1280.

Horii, R., and Iwaisako, T., 2007. Economic growth with imperfect protection of intellectual property rights. Journal of Economics, 90, 45-85.

Howitt, P., and Mayer-Foulkes, D., 2005. R&D, implementation and stagnation: A Schumpeterian theory of convergence clubs. Journal of Money, Credit and Banking, 37, 147-177.

Hu, A., and Jefferson, G., 2009. A great wall of patents: What is behind China's recent patent explosion? Journal of Development Economics, 90, 57-68.

Iwaisako, T., and Futagami, K., 2003. Patent policy in an endogenous growth model. Journal of Economics, 78, 239-258.

Iwaisako, T., and Futagami, K., 2013. Patent protection, capital accumulation, and economic growth. Economic Theory, 52, 631-668.

Iwaisako, T., Tanaka, H., and Futagami, K., 2011. A welfare analysis of global patent protection in a model with endogenous innovation and foreign direct investment. European Economic Review, 55, 1137-1151.

Javorcik, B., 2004. The composition of foreign direct investment and protection of intellectual property rights: Evidence from transition economies. European Economic Review, 48, 39-62.

Judd, K., 1985. On the performance of patents. Econometrica, 53, 567-586.

Kwan, Y., and Lai, E., 2003. Intellectual property rights protection and endogenous economic growth. Journal of Economic Dynamics and Control, 27, 853-873.

La Croix, S., and Konan, D., 2002. Intellectual property rights in China: The changing political economy of Chinese-American interests. World Economy, 25, 759-788.

Lai, E., 1998. International intellectual property rights protection and the rate of product innovation. Journal of Development Economics, 55, 133-153.

Lee, J.-Y., and Mansfield, E., 1996. Intellectual property protection and US foreign direct investment. Review of Economics and Statistics, 78, 181-186.

Lerner, J., 2009. The empirical impact of intellectual property rights on innovation: Puzzles and clues. American Economic Review, 99, 343--348.

Li, C.-W., 2001. On the policy implications of endogenous technological progress. Economic Journal, 111, C164-C179.

Li, Y., 2010. Imitation to Innovation in China: The Role of Patents in Biotechnology and Pharmaceutical Industries. Northampton, Mass.: Edward Elgar Publishing.

Luo, C., and Zhang, J., 2010. Declining labor share: Is China's case different? China & World Economy, 18, 1-18.

Merrill, S., Levin, R., and Myers, M., 2004. A Patent System for the 21st Century. Washington, DC: National Academies Press.

Nordhaus, W., 1969. Invention, Growth, and Welfare. Cambridge, Mass.: The MIT Press.

O'Donoghue, T., and Zweimuller, J., 2004. Patents in a model of endogenous growth. Journal of Economic Growth, 9, 81-123.

Parello, C., 2008. A north-south model of intellectual property rights protection and skill accumulation. Journal of Development Economics, 85, 253-281.

Park, W., 2008a. International patent protection: 1960-2005. Research Policy, 37, 761-766.

Park, W., 2008b. Intellectual property rights and international innovation. In K. Maskus (ed.) Frontiers of Economics and Globalization, vol. 1, Handbook Series, Elsevier Science.

Qian, Y., 2007. Do national patent laws stimulate domestic innovation in a global patenting environment? A cross-country analysis of pharmaceutical patent protection, 1978--2002. Review of Economics and Statistics, 89, 436--453.

Segerstrom, P., 1991. Innovation, imitation, and economic growth. Journal of Political Economy, 99, 807-827.

Sepetys, K., and Cox, A., 2009. Intellectual property rights protection in China: Trends in litigation and economic damages. NERA Economic Consulting Working Paper.

Tanaka, H., Iwaisako, T., and Futagami, K., 2007. Dynamic analysis of innovation and international transfer of technology through licensing. Journal of International Economics, 73, 189-212.

The Economist, 2011. The world economy: Catching up is very hard to do. September 24th, 2011.

The Economist, 2013. China: Voting with their wallets. April 20th, 2013.

The US-China Business Council, 2013. Intellectual property rights recommendation list. February 2013.

Wu, H., 2010. Distance to frontier, intellectual property rights, and economic growth. Economics of Innovation and New Technology, 19, 165-183.

Yang, G., and Maskus, K., 2001. Intellectual property rights, licensing, and innovation in an endogenous product-cycle model. Journal of International Economics, 53, 169-187.

Yang, W., and Yen, Y., 2010. The dragon gets new IP claws: The latest amendments to the Chinese patent law. IPO Articles and Reports.

WIPO, 2012. World Intellectual Property Indicators. WIPO Economics & Statistics Series.

Zuber, J., 2008. Trade secrets rules, regulation and enforcement in China and the US: A comparative analysis. China Intellectual Property, May-June 2008, 51-55.