Does stronger intellectual property rights protection foster structural change? Effects of heterogeneity in innovations

Abstract

This paper studies the question how changes in intellectual property rights (IPR) regime affect relative innovation intensity for multinational large enterprises (MNEs) and local firms. The R&D process is doubly-differentiated, allowing both for variety-expanding and productivity-improving innovations. The IPR regime is abstracted as an effective duration of patent protection. From one side stronger IPR foster R&D activities of the MNE, which is in agreement with other findings. From the other side the local innovative activity is threatened by stronger protection. Depending on technical characteristics of the underlying R&D processes, the strengthening of the uniform one-size-fits-all IPR creates productivity bias or variety bias. Moreover, if technologies are heterogeneous, this bias varies over time implying the necessity of technology-specific heterogeneous IPR protection regimes to foster structural change and avoid technology lock-ins.