Munich Personal RePEc Archive

Do Cross-border Patents Promote Trade?

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

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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.

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