Do Stronger Patents Stimulate or Stifle Innovation? The Crucial Role of Financial Development



Chu, CA ORCID: 0000-0002-7196-1277, Cozzi, Guido, Fan, Haichao, Pan, Shiyuan and Zhang, Mengbo
(2020) Do Stronger Patents Stimulate or Stifle Innovation? The Crucial Role of Financial Development. Journal of Money, Credit and Banking, 52 (5). 1305 - 1322.

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Abstract

This study explores the effects of patent protection in a research and development (R&D)‐based growth model with financial frictions. We find that whether stronger patent protection stimulates or stifles innovation depends on credit constraints faced by R&D entrepreneurs. When credit constraints are nonbinding (binding), strengthening patent protection stimulates (stifles) R&D. The overall effect of patent protection on innovation follows an inverted‐U pattern. By relaxing the credit constraints, financial development stimulates innovation. Furthermore, patent protection is more likely to have a positive effect on innovation under a higher level of financial development. We consider cross‐country panel regressions and find supportive evidence for this result.

Item Type: Article
Uncontrolled Keywords: E44, O31, O34, patent protection, credit constraints, economic growth, convergence
Depositing User: Symplectic Admin
Date Deposited: 29 Mar 2019 08:09
Last Modified: 16 Nov 2021 10:30
DOI: 10.1111/jmcb.12629
Related URLs:
URI: https://livrepository.liverpool.ac.uk/id/eprint/3035288