Do Patents Foster International Technology Transfer? Evidence from Spanish Steelmaking, 1850-1930

Abstract

Why do developing countries protect the intellectual property rights (IPR) of foreign inventors? Does this facilitate technology transfer from the industrial frontier? This paper addresses those questions by telling the story of when and how technology was transferred through patent licensing to Spanish iron and steelmakers from the rest of Europe. It focuses on the period between 1850 and 1929, during which foreigners’ IPR were relatively well protected. Modern steelmaking was a quantum leap over previous techniques vis-a-vis scale and sophistication. In turn, this required a revolution in technology, knowledge, and skills. However, the transition to modern steelmaking was marked by a challenging process that has gone largely unrecognized by researchers: inventors had to find ways to transfer tacit knowledge to adopters that was inordinately difficult to codify, as it was arrived at via intuition and learning-by-doing. Patents played a key role in broadcasting new steelmaking techniques to Spaniards working in that industry. They also helped Spaniards connect with original, foreign inventors and establish enduring relationships with them. The latter shared their knowhow and expertise with the former under the aegis of licensing agreements and brought them into their networks of suppliers and technicians. Moreover, when disruptive steelmaking innovations were patented in Spain, this spurred second generation foreign inventors to patent improvements. It also induced Spanish inventors to contribute their own add on innovations, which they themselves patented.