Do Cross-border Patents Promote Trade?

Brunel, Claire and Zylkin, Thomas (2019): Do Cross-border Patents Promote Trade?

Abstract

While we would expect that cross-border patents are used to protect a technology that is made available in another country, that technology could either be produced locally or imported. International patent filings could therefore be either complements or substitutes to international trade. This study combines data on patenting and trade for 149 countries and 249 industries between 1974 and 2006 with a "three-way" PPML panel data model that addresses several biases emphasized in the trade literature in order to provide a systematic analysis of how bilateral trade responds to cross-border patent filings. We find that cross-border patents have a positive (complementary) overall effect on the patent-filing country's exports to the patent-granting country and no effect overall on imports flowing in the opposite direction. These effects vary substantially across industries and destination markets. Patents promote significantly more bilateral export growth--and significantly less bilateral import growth--in less-differentiated industries and are found to have stronger effects on exports to more distant destinations. These findings support the interpretation that cross-border patents are mainly used to protect cost and/or quality innovations from being adopted by producers of competing products in the patent-granting country.

• Item Type: MPRA Paper
• Language: English
• Keywords: F10; F13; F14; O34; K33
• Subjects: F - International Economics > F1 - Trade > F10 - General; F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; K - Law and Economics > K3 - Other Substantive Areas of Law > K33 - International Law; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O34 - Intellectual Property and Intellectual Capital

References

Alchian, A. A., and W. R. Allen (1972): University Economics: Elements of Inquiry. Wadsworth.

Alfaro, L., P. Antràs, D. Chor, and P. Conconi (2015): “Internalizing Global Value Chains: A Firm-Level Analysis,” Working Paper 21582, National Bureau of Economic Research.

Anderson, J. E., and E. van Wincoop (2003): “Gravity with Gravitas: A Solution to the Border Puzzle,” American Economic Review, 93(1), 170–192.

Anderton, B. (1999): “Innovation, Product Quality, Variety, and Trade Performance: An Empir- ical Analysis of Germany and the UK,” Oxford Economic Papers, 51(1), 152–167.

Antimiani, A., and V. Costantini (2013): “Trade Performances and Technology in the Enlarged European Union,” Journal of Economic Studies, 40(3), 355–389.

Antràs, P., and D. Chor (2013): “Organizing the Global Value Chain,” Econometrica, 81(6), 2127–2204.

Autor, D., D. Dorn, G. H. Hanson, G. Pisano, and P. Shu (2016): “Foreign Competition and Domestic Innovation: Evidence from U.S. Patents,” Working Paper 22879, National Bureau of Economic Research, DOI: 10.3386/w22879.

Baier, S. L., and J. H. Bergstrand (2007): “Do Free Trade Agreements Actually Increase Members’ International Trade?,” Journal of International Economics, 71(1), 72–95.

Baldwin, R., and D. Taglioni (2007): “Trade Effects of the Euro: A Comparison of Estimators,” Journal of Economic Integration, 22(4), 780–818.

Batrakova, S., and A. Dechezleprêtre (2013): “Is there a Trade-off between ’Dirty’ Imports and ’Clean’ Innovation?,” Discussion paper, Mimeo.

Blonigen, B. A. (2001): “In Search of Substitution between Foreign Production and Exports,” Journal of International Economics, 53(1), 81–104.

Bloom, N., M. Draca, and J. V. Reenen (2011): “Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity,” Working Paper 16717, National Bureau of Economic Research, DOI: 10.3386/w16717.

Bond, E. W., and K. Saggi (2014): “Compulsory Licensing, Price Controls, and Access to Patented Foreign Products,” Journal of Development Economics, 109, 217–228.

Borcherding, T. E., and E. Silberberg (1978): “Shipping the Good Apples Out: the Alchian and Allen Theorem Reconsidered,” Journal of Political Economy, 86(1), 131–138.

Boring, A. (2015): “The Impact of Patent Protection on US Pharmaceutical Exports to Developing Countries,” Applied Economics, 47(13), 1314–1330.

Briggs, K., and W. G. Park (2014): “There will be Exports and Licensing: The Effects of

Patent Rights and Innovation on Firm Sales,” The Journal of International Trade & Economic Development, 23(8), 1112–1144.

Broda, C., and D. E. Weinstein (2006): “Globalization and the Gains from Variety,” Quarterly Journal of Economics, 121(2), 541–585.

Brunel, C. (2017): “Green Innovation and Green Manufacturing: Links between Environmental Policies, Innovation, and Production,” unpublished manuscript.

Chalioti, E., S. Drivas, Kyriakos Kalyvitas, and M. Katsimi (2017): “Innovation, Patents and Trade: A Firm-level Analysis,” Discussion paper, mimeo.

Chen, W.-C. (2013): “The Extensive and Intensive Margins of Exports: The Role of Innovation,” The World Economy, 36(5), 607–635.

Cheng, I.-h., and H. J. Wall (2005): “Controlling for Heterogeneity in Gravity Models of Trade and Integration,” Federal Reserve Bank of St. Louis Review, 87(1), 49–64.

Comin, D., and B. Hobijn (2010): “An Exploration of Technology Diffusion,” The American Economic Review, 100(5), 2031–2059.

Correia, S. (2015): “Singletons, Cluster-robust Standard Errors and Fixed Effects: A Bad Mix,” Unpublished paper.

Correia, S., P. Guimarães, and T. Zylkin (2019a): “PPMLHDFE: Fast Poisson Estimation with High-dimensional Data,” Unpublished manuscript. (2019b): “Verifying the Existence of Maximum Likelihood Estimates for Generalized Linear Models,” Unpublished manuscript.

De Rassenfosse, G. (2013): “Do Firms Face a Trade-off between the Quantity and the Quality of their Inventions?,” Research Policy, 42(5), 1072–1079.

De Rassenfosse, G., A. Palangkaraya, and E. Webster (2016): “Why do Patents Facilitate Trade in Technology? Testing the Disclosure and Appropriation Effects,” Research Policy, 45(7), 1326–1336.

Dernis, H., and M. Khan (2004): “Triadic Patent Families Methodology,” .

Feenstra, R. C., R. E. Lipsey, H. Deng, A. C. Ma, and H. Mo (2005): “World Trade Flows: 1962-2000,” Working Paper 11040, National Bureau of Economic Research.

Figueiredo, O., P. Guimarães, and D. Woodward (2015): “Industry Localization, Distance Decay, and Knowledge Spillovers: Following the Patent Paper Trail,” Journal of Urban Eco- nomics, 89(C), 21–31.

French, S. (2016): “The Composition of Trade Flows and the Aggregate Effects of Trade Barriers,” Journal of International Economics, 98, 114–137. (2019): “Comparative Advantage and Biased Gravity,” Unpublished manuscript.

Fusco, S. (2013): “Markets and Patent Enforcement: A Comparative Investigation of Non- Practicing Entities in the United States and Europe,” Mich. Telecomm. & Tech. L. Rev., 20, 439.

Glick, R., and A. K. Rose (2016): “Currency Unions and Trade: A Post-EMU Reassessment,” European Economic Review, 87, 78–91.

Greenhalgh, C. (1990): “Innovation and Trade Performance in the United Kingdom,” The Eco- nomic Journal, 100(400), 105–118.

Griliches, Z. (1995): “R&D and Productivity: Econometric Results and Measurement Issues,” in Handbook of the Economics of Innovation and Technological Change, pp. 52–89. Blackwell Publishers. (1998): “Patent Statistics as Economic Indicators: a Survey,” in R&D and Productivity: the Econometric Evidence, pp. 287–343. University of Chicago Press.

Grossman, G. M., and E. L.-C. Lai (2002): “International Protection of Intellectual Property,” NBER Working Paper, 8704. (2004): “International Protection of Intellectual Property,” American Economic Review, 94(5), 1635–1653.

Head, K., and T. Mayer (2014): “Gravity Equations: Workhorse, Toolkit, and Cookbook,” in Handbook of International Economics, ed. by G. Gopinath, E. Helpman, and K. Rogoff, vol. 4, pp. 131–195. North Holland, 4 edn.

Hummels, D., and A. Skiba (2004): “Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture,” Journal of Political Economy, 112(6), 1384–1402.

Ivus, O. (2010): “Do Stronger Patent Rights Raise High-tech Exports to the Developing World?,” Journal of International Economics, 81(1), 38–47.

Keller, W. (2004): “International Technology Diffusion,” Journal of Economic Literature, 42(3), 752–782.

Keller, W., and S. R. Yeaple (2013): “The Gravity of Knowledge,” The American Economic Review, 103(4), 1414–1444.

Kinzius, L., A. Sandkamp, and E. Yalcin (2018): “Trade Protection and the Role of Non-tariff Barriers,” Discussion paper.

Lai, E. L.-C., and L. D. Qiu (2003): “The North’s Intellectual Property Rights Standard for the South?,” Journal of International Economics, 59(1), 183–209.

Larch, M., J. Wanner, Y. V. Yotov, and T. Zylkin (2018): “Currency Unions and Trade: A PPML Re-assessment with High-dimensional Fixed Effects,” Oxford Bulletin of Economics and Statistics.

Limão, N. (2007): “Are Preferential Trade Agreements with Non-trade Objectives a Stumbling Block for Multilateral Liberalization?,” The Review of Economic Studies, 74(3), 821–855.

Lovely, M., and D. Popp (2011): “Trade, Technology, and the Environment: Does Access to Technology Promote Environmental Regulation?,” Journal of Environmental Economics and Management, 61(1), 16–35.

Lybbert, T. J., and N. J. Zolas (2014): “Getting Patents and Economic Data to Speak to each Other: An ‘Algorithmic Links with Probabilities’ Approach for Joint Analyses of Patenting and Economic Activity,” Research Policy, 43(3), 530–542.

Maskus, K. E. (2018): “International Agreements on Intellectual Property Rights: TRIPS and Beyond,” in Handbook of International Trade Agreements, pp. 59–70. Routledge.

Maskus, K. E., and M. Penubarti (1995): “How Trade-related are Intellectual Property Rights?,” Journal of International Economics, 39(3), 227–248.

McCalman, P. (2001): “Reaping What you Sow: An Empirical Analysis of International Patent Harmonization,” Journal of International Economics, 55(1), 161–186.

Nunn, N., and D. Trefler (2013): “Incomplete Contracts and the Boundaries of the Multina- tional Firm,” Journal of Economic Behavior & Organization, 94(Supplement C), 330–344.

Palangkaraya, A., P. H. Jensen, and E. Webster (2017): “The Effect of Patents on Trade,” Journal of International Economics, 105, 1–9.

Park, W. G. (2008): “International Patent Protection: 1960–2005,” Research Policy, 37(4), 761– 766.

Popp, D. (2002): “Induced innovation and energy prices,” American economic review, 92(1), 160– 180. (2003): “Pollution control innovations and the Clean Air Act of 1990,” Journal of Policy Analysis and Management, 22(4), 641–660.

Popp, D., I. Hascic, and N. Medhi (2011): “Technology and the Diffusion of Renewable Energy,” Energy Economics, 33(4), 648–662.

Rauch, J. E. (1999): “Networks versus Markets in International Trade,” Journal of International Economics, 48(1), 7–35.

Robbins, C. A. (2006): “The Impact of Gravity-weighted Knowledge Spillovers on Productivity in Manufacturing,” The Journal of Technology Transfer, 31(1), 45–60.

Saggi, K. (2002): “Trade, Foreign Direct Investment, and International Technology Transfer: A Survey,” The World Bank Research Observer, 17(2), 191–235. (2016): “Trade, Intellectual Property Rights, and the World Trade Organization,” in Handbook of Commercial Policy, vol. 1, pp. 433–512. Elsevier.

Santos Silva, J. M. C., and S. Tenreyro (2006): “The Log of Gravity,” Review of Economics and Statistics, 88(4), 641–658.

Scherngell, T., and Y. Hu (2011): “Collaborative Knowledge Production in China: Regional Evidence from a Gravity Model Approach,” Regional Studies, 45(6), 755–772.

Schmidt, J., and W. Steingress (2018): “No Double Standards: Quantifying the Impact of Standard Harmonization on Trade,” Discussion paper, mimeo.

Weidner, M., and T. Zylkin (2018): “Bias and Consistency in Three-Way Gravity Models,” unpublished manuscript.

Wooldridge, J. M. (2002): Econometric Analysis of Cross Section and Panel Data. MIT Press, Cambridge, MA.

Yang, L., and K. E. Maskus (2009): “Intellectual Property Rights, Technology Transfer and Exports in Developing Countries,” Journal of Development Economics, 90(2), 231–236.

Yotov, Y. V., R. Piermartini, J.-A. Monteiro, and M. Larch (2016): An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model. World Trade Organization, Geneva.