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This paper examines how technology transfer within U. S. multinational firms changes in response to a series of IPR reforms undertaken by sixteen countries over the 1982–1999 period. Analysis of detailed firm-level data reveals that royalty payments for technology transferred to affiliates increase at the time of reforms, as do affiliate R&D expenditures and total levels of foreign patent applications. Increases in royalty payments and R&D expenditures are concentrated among affiliates of parent companies that use U. S. patents extensively prior to reform and are therefore expected to value IPR reform most. For this set of affiliates, increases in royalty payments exceed 30 percent. I.

Of the diverse factors motivating technological change, one factor that has received increasing attention in the recent past has been the protection of intellectual property rights. Given fairly recent changes in the international policy ethos where a regime of stronger intellectual property protection has become a fait accompli for most developing countries, it is of some significance to ask whether more stringent protection of intellectual property does indeed encourage innovation. And this is the question which this paper examines, utilising crosscountry panel data on R&D investment, patent protection and other country-specific characteristics spanning the period 1981-1990. The evidence unambiguously indicates the significance of intellectual property rights as incentives for spurring innovation. JEL Classification: O34, O31 Keywords: Intellectual Property Rights, Technological Change, Economic Growth 2 Does Intellectual Property Protection spur Technological Change? Sunil Kanwar and Robert Evenson A distinctive characteristic of modern economic growth has been the significant role played by technological change. Of the diverse factors motivating technological change, one factor that has received increasing attention in the recent past has been the role of intellectual property protection. Given the shift in the ownership distribution of innovations away from individuals and towards large corporations in `recent decades' 1 , intellectual property protection has arguably become an even more important stimulus than hitherto; for such protection augments both the means and the incentive to undertake expensive innovation. While there has been an on-going debate on whether strong(er) intellectual property protection encourages or retards the rate of technological cha...

Intellectual property rights (IPR) have recently moved to the forefront of debates over international policy. As each country establishes its own institutions of IPR, a divergence exists between net producers and net consumers in the returns to providing strong protection. Under pressure from the developed world, many developing countries have begun to strengthen their IPR, particularly as regards patents. These changes in policy provide us with an opportunity to learn more about the effects of intellectual property institutions in developing countries. Whether and to what extent do stronger IPR spur inventive activity in a developing country? What are the factors or characteristics of industries in which strengthening patent rights has the most favorable impact on inventive activity? Will the strengthening of IPR in developing countries induce more foreign direct investment and technology transfer from abroad? In an attempt to answer these questions, this paper uses the 1986 Taiwanese patent reforms to examine the impact of strengthening patent rights in a developing economy. The evidence on the number of patents awarded to Taiwanese inventors as well as that on R&D spending in Taiwan suggests that the reforms stimulated additional inventive activity, especially in industries where patent protection is generally regarded as an effective strategy for extracting returns, and in industries which are more R&D

Harrington, and participants at many seminars and conferences for helpful comments. We gratefully acknowledge We argue that when discoveries are “sequential ” (so that each successive invention builds in an essential way on its predecessors) patent protection is not as useful for encouraging innovation as in a static setting. Indeed, society and even inventors themselves may be better off without such protection. Furthermore, an inventor’s prospective profit may actually be enhanced by competition and imitation. Our sequential model of innovation appears to explain evidence from a natural experiment in the software industry

This article develops and implements a simulation approach to value patents and patent-protected R&D projects based on the Real Options approach. It takes into account uncertainty in the cost-to-completion of the project, uncertainty in the cash flows to be generated from the project, and the possibility of catastrophic events that could put an end to the effort before it is completed. It also allows for the possibility of abandoning the project when costs turn out to be larger than expected or when estimated cash flows turn out to be smaller than anticipated. This abandonment option represents a very substantial part of the project’s value when the project is marginal or/and when uncertainty is large. The model presented can be used to evaluate the effects of regulation on the cost of innovation and the amount on innovative output. The main focus of the article is the pharmaceutical industry. The framework, however, applies just as well to other researchintensive industries such as software or hardware development. 2

A patent is the legal right of an inventor to exclude others from making or using a particular invention. This right is sometimes termed an “intellectual property right ” and is viewed as an incentive for innovation. This article surveys the evidence on patent effectiveness in encouraging innovation and reviews the current controversies in patent policy.

The impact of stronger intellectual property rights in the software industry is controversial. One means by which patents can affect technical change, industry dynamics, and ultimately welfare, is through their role in stimulating or stifling entry by new ventures. Patents can block entry, or raise entrants ’ costs in variety of ways, while at the same time they may stimulate entry by improving the bargaining position of entrants vis-à-vis incumbents, and supporting a “market for technology” which enables new ventures to license their way into the market, or realize value through trade in their intangible assets. One important impact of patents may be their influence on capital markets, and here we find evidence that the extraordinary growth in patenting of software during the 1990s is associated with significant effects on the financing of software companies. Start-up software companies operating in markets characterized by denser patent thickets see their initial acquisition of VC funding delayed relative to firms in markets less affected by patents. The relationship between patents and the probability of IPO or acquisition is more complex, but there is some evidence that firms without patents are less likely to go public if they operate in a market characterized by patent thickets.

Global climate change mitigation will require the development and diffusion of a large number and variety of new technologies. How will patent protection affect this process? In this paper we first review the evidence on the role of patents for innovation and international technology transfer in general. The literature suggests that patent protection in a host country encourages technology transfer to that country but that its impact on innovation and development is much more ambiguous. We then discuss the implications of these findings and other technology-specific evidence for the diffusion of climate changerelated technologies. We conclude that the “double externality ” problem, that is the presence of both environmental and knowledge externalities, implies that IP may not be the ideal and cannot be the only policy instrument to encourage innovation in this area and that the range and variety of green technologies as well as the need for local adaptation of technologies means that patent protection may be neither available nor useful in some