The link between intellectual property rights, innovation, and growth: A meta-analysis
Introduction
Intellectual property rights (IPR) are widely believed to play a crucial role in encouraging innovation, fostering technological progress, and stimulating economic growth (Barro and Sala-i-Martin, 2004). As Machlup (1961) and Arrow (1962) argue, IPR encourage innovation, because they grant successful inventors temporary monopoly power over their innovations. Over the years, many IPR instruments with different purposes and application fields have been developed. From the Industrial Revolution onward, the power of preventing others from using one’s intellectual creations has been strengthened to encourage private investment in innovation activities and promote sustainable economic growth. As Braga et al. (1999) emphasize, the main intention has been to regulate the relationship between innovators/creators and consumers and to reward innovators/creators for their ideas.
Nevertheless, many scholars have questioned whether IPR are in fact responsible for inducing innovation and, as a result, economic growth. How or how much IPR stimulate innovation and economic growth has attracted considerable attention from economists. The related theoretical literature has increased considerably, and many empirical studies have been conducted to assess the effects of IPR on innovation and growth.1
For example, Torun and Cicekci (2007); Arora et al. (2008); Ang et al. (2014); Chu et al. (2014); Yang et al. (2014); and Bielig (2015) argue that IPR protection has a positive impact on innovation and growth. In contrast, Grossman and Helpman (1991) and Boldrin and Levine (2009), among others, find that IPR protection should be reduced in order to encourage creation and innovation, and thereby foster growth. Hence, as Cho et al. (2015) state, the causal relationship between IPR protection, innovation, and economic growth is somewhat ambiguous, in both theory and the empirical literature. The complexity of the effects across countries, firms, and time is justified by the variety of approaches in the literature. For example, Ginarte and Park (1997) conclude that IPR are important for R&D activities in developed economies, but not in developing economies. Chen and Puttitanun (2005) find a positive impact of IPR on innovation in developing countries and a U-shaped relationship between IPR and economic growth. Falvey et al. (2006a) show that stronger IPR protection induces faster growth in developed countries and can also have a positive impact on the growth rate of the poorest countries. Thus, the effects of IPR are not completely clear.
Our motivation stems from the variation in results of empirical studies and the diversity of approaches used to assess the link between IPR, innovation, and growth. Our main research questions are: Why are the studies’ conclusions so divergent? Given the empirical literature, is it possible to establish a consistent relationship between IPR, innovation, and growth?
We employ a meta-analysis to answer these questions. This technique uses statistical methods to summarize and analyse the empirical results, thus providing a more formal and objective process for reviewing empirical studies (Stanley, 2001). It also allows us to compare different research results and identify the sources of their heterogeneity.
We find that after correcting for publication bias, the overall effect of IPR on innovation and growth is positive. However, the effect on innovation is weaker in developing countries—where investment in innovative activities is low and it is preferable to imitate external innovations—than in developed countries, where the relevant policies and the economic and institutional environment are conducive to domestic innovation. We also find that the heterogeneity in the reported effects of IPR can be explained by differences in studies’ methodological characteristics, such as the data structure, level of data/analysis, measurement of IPR, sample size, or publication quality. Our main findings have relevant policy implications.
The paper is organized as follows: Section 2 provides a brief review of the theoretical and empirical literature on the relationship between IPR, innovation, and economic growth. Section 3 presents the concepts and objectives of the meta-analysis, as well as the criteria used for their inclusion. Section 4 reports estimates of the average effect of IPR on innovation and growth and tests for the presence of publication bias. A meta-regression is estimated in Section 5 in order to identify the sources of variation in the reported effect sizes, and Section 6 concludes.
Section snippets
Intellectual property rights: historical overview
In the contemporary world the main economic development challenge is based on the ability to generate and manage knowledge appropriability, and on the distribution of wealth. Over the years the concept of business wealth has changed and currently human and knowledge capital are widely regarded as the most valuable intangible assets. IPR in turn have become the base and the motivation for technological progress and new knowledge.
Indeed, the creation and dissemination of new knowledge,
Meta-analysis: concepts and objectives
As stated by Glass (1976, p.3), meta-analysis is “the analysis of analyses”. It is a methodology that “provides a more formal and objective process on reviewing empirical literature. It employs conventional statistical methods and criteria to summarize and evaluate empirical economics” (Stanley, 2001, p.147–148). It is a method that synthesizes, combines, and explains the results of the empirical literature on a specific topic (Nijkamp and Poot, 2004).
Although it was first used in medicine and
Publication bias and estimation of average effect
One of the first steps in conducting a meta-analysis is to test whether there is publication bias. In its most common form publication bias refers to the tendency for authors to produce and editors to publish only statistically significant results. This leads to a distortion in the results reported by the empirical literature on a specific topic (Doucouliagos, 2005).
In a simple way, this issue can be examined using a funnel plot; that is, a scatter figure that shows the relationship between the
Multivariate Meta-Regression Analysis
In this Section we estimate a multivariate meta-regression to assess how the differences in studies’ methodological characteristics explain the heterogeneity in effect sizes. We pay particular attention to the differences highlighted in the Literature Review section. We account for differences regarding the: development level of the countries included in the sample of the primary studies; way of measurement of IPR; level (unit) of analysis; structure of the data; estimation techniques; sample
Conclusions
In this paper we examined the empirical trends in the relationship between IPR, innovation, and growth. We began by emphasizing the increasing importance of IPR protection on innovation encouragement, as well as their influence on growth. Then, by means of a meta-analysis we conducted a quantitative analysis of the empirical literature that estimates the effect of the IPR on Innovation and Growth. Our approach allowed us to summarize and to systematize the empirical results of this literature
Financing
This paper is financed by National Funds of the FCT - Portuguese Foundation for Science and Technology within the projects UIDB/04007/2020, UIDB/04105/2020, UIDP/04105/2020, and UIDB/04630/2020.
Declaration of competing interest
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Acknowledgments
We are grateful to the journal editor, Angus Chu, and to two anonymous referees for their valuable comments.
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