(1.8MB)

Goh Chun Keong

NUS Economics Honours (2002/03) Thesis Paper
Submitted to Department in March 2003

---- Abstract ----

In this paper, we investigate the relationship between Intellectual Property Rights (IPRs) and the rate of innovation. Given the current controversies that swirl around Intellectual Property policies, we review the economic reasoning that supports the IPRs and the underlying economic incentives to induce further innovation. In addition, the optimal design of the IPR system will also be discussed. For instance, on the issue of how extensive the protection of awards is in both stand-alone and sequential innovation environments.

The recent strengthening of patent regime in the United States has ushered in the surge in the patents granted since the 1980s. But have firms really gone more innovative (induced by stronger patents) as conventional wisdom dictates? To test this patents-innovation hypothesis, we examine the patenting behaviour of 58 U.S. firms in semiconductor industry characterised by rapid technological change and cumulative innovation. Previous studies have shown that such firms are not dependent on patents yet the propensity to patent has risen dramatically since the mid 1980s.

Our quantitative results suggest that the broadening of U.S. patent rights cause no significant improvement in the rate of innovation. Instead firms patent for offensive and defensive reasons, entirely unrelated to improvements in technology. This is unlike what theoretical economics literature had predicted earlier on.

This paper is available as PDF 4.0+ (1.8MB) or via email.

¹: I thank my supervisor Dr Albert Hu for his invaluable advice and help.