Impact of stronger intellectual property rights regime on innovation: Evidence from de alio versus de novo Indian bio-pharmaceutical firms

Abstract

We examine the impact of a stronger intellectual property rights (IPR) regime through the adoption of Trade-Related Aspects of Intellectual Property Rights (TRIPS) on innovation by Indian firms in the bio-pharmaceutical industry. We find that differences in the IPR regime at the time a firm was founded led to subsequent differences in firms’ propensity to innovate and their nature of innovations. Building on institutional change theory, we argue that firms created under the pre-TRIPS regime, which we refer to as de alio firms, have a lower propensity to innovate and have a focus on process innovations. De novo firms, which are firms created under TRIPS, have a greater propensity to innovate and have a focus on product innovations. Further, we study how international technology alliances have helped Indian bio-pharmaceutical firms to overcome their limitations arising due to institutional imprints and to improve their innovation capabilities. Data on 164 Indian bio-pharmaceutical firms from 1995 to 2018 is used to empirically test our hypotheses.