Role of Intellectual Property Rights and Patent Propensity in R&D and Industry value-added

Abstract

This thesis studies the relationship between intellectual property rights (IPR) and innovation and economic growth using 12 countries and four industries for the period of 1987-2005. The research also relies on the concept of patent propensity, which is represented by the ratio of patent stocks to R&D stocks. These patent propensities in the corresponding industries are used to explain the impact of this factor on the role IPR on R&D investments. The empirical results using 3SLS estimation on simultaneous equations (R&D equation and value-added equations) revealed that the higher the patent propensity, the greater the contribution of IPR on R&D activities, suggesting that the prior innovative capacity is crucial for the effective establishment of an incentive mechanism of intellectual property rights. This research also shows that IPR in general is a good mechanism for allowing a virtuous cycle of R&D and value-added factors. The contribution of IPR, which appears in R&D activities, adds to the stock of R&D and therefore contributes to the value of the industry, meaning that IPR indirectly enhances economic growth by allowing the accumulation of a stock of knowledge. At the same time, the empirical results of the IPRs direct contribution on the value of industry suggest the possible presence of technology commercialization and licensing activities. The sectoral comparison between four industries reveals several important characteristics. First, the concept of IPR itself is not related to R&D investments in electronic industries

given the presence of the ongoing debate on whether our IPR regime is providing the optimal environment for innovation (especially for the electronic industry), this empirical result can cause us to rethink our current patent system. Overall, the empirical results showed that the chemical and machine industries make significant IPR contributions via R&D investments. Regarding the role of IPR in the area of value-added industry, IPR was shown to be an effective mechanism in all industries except for the transportation equipment industry. The electronic industry by far showed the greatest direct effect of IPR, which can be explained by the vigorous technology commercialization and licensing activities in that industry.