Abstract
Recent empirical research suggests that modern patent pools might be anti-innovative. In this paper, first I investigate the effect of the MPEG-2 pool, the first modern patent pool, on the patenting rate of firms outside the pool. Results confirm previous findings and show a substantial decline in outsiders’ patenting rate after the pool formation. Subsequently, I explore three mechanisms that can potentially explain this negative impact. The results suggest that the observed reduction is mainly due to a shift in firms’ investment from additional patentable technological exploration toward implementing the pool technology in their products. I do not find support for arguments linking the decline to an increase in the litigation risks or a decrease in the financial performance of outsiders after the pool formation.
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