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). pp. 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:	19 Jan 2023 00:55
DOI:	10.1111/jmcb.12629
Related URLs:	Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3035288