The impact of patent protection and financial development on industrial R&D |
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Authors: | Keith E. Maskus Sahar Milani Rebecca Neumann |
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Affiliation: | 1. Department of Economics, UCB 256, University of Colorado at Boulder, Boulder, CO, 80309-0256, USA;2. Department of Economics, Hepburn Hall 205, St. Lawrence University, Canton, NY, 13617, USA;3. Department of Economics, PO Box 413, University of Wisconsin at Milwaukee, Milwaukee, WI, 53201-0413, USA |
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Abstract: | Stronger protection of patent rights is thought to spur innovation through securing returns to R&D investments. Those investments must be financed, however, suggesting that the responsiveness of R&D to patent reforms varies with financial development levels. We examine the joint impact of domestic and international financial-market development and patent protection on R&D intensities in 22 manufacturing industries in 20 OECD countries for the period 1990-2009. We show that stronger patent rights increase R&D intensities in patent-intensive industries, accounting for the need for external financing and the amount of tangible assets. The primary impact varies across types of financial development: patent protection raises R&D in high-patent industries where countries have more limited equity and credit markets. In contrast, in countries with more developed bond markets industry R&D is more sensitive to patent rights. Interestingly, patent rights in countries that are more exposed to foreign direct investment increase R&D intensities at all levels of financial development. |
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Keywords: | F36 G10 G15 O16 O30 P14 R&D Financial development Patent protection |
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