Responses of Incumbents to Patent Enforcement: An Examination of the Korean Case

Abstract

Does stronger patent enforcement stimulate innovation activities? After the 1994 Korean patent reform, a substantial increase in the number of patent applications in the electronics and related equipment industries has been observed. This paper investigates how stronger patent enforcement affected the activities of firm innovation and whether the observed upsurge of patenting propensity is attributable to the increase in innovation activities. The regression results show that incumbents with large fixed capital strategically responded to patent enforcement by substantially increasing patent applications, but not research and development intensity. The results were consistent with the strategic response hypothesis and suggested that the 1994 Korean patent enforcement did not stimulate the innovation activities of firms.