Nonlinear Effects of Intellectual Property Rights on Technological Innovation

Abstract

This study investigates the influence of intellectual property rights on innovation under the assumption that an optimal threshold has been reached beyond which the protection by the Institute of Pacific Relations, the non-governmental organization, is no longer working as an incentive for innovation. We estimate a threshold model applied to panel data on 10 emerging countries for 1985~2015. The results revealed a significant influence of the threshold of the intellectual property rights on innovation. In other words, the impact of protection by the Institute of Pacific Relations on innovation is significant, which implies a nonlinear relationship. It was also shown to play an indirect role by increasing the impact of human capital and economic development on innovation. These results have important implications for designing economic policy. In the emerging country, a minimum level of protection by the institute of pacific relations is needed to ensure an incentive encouraging technological innovation. Therefore, there is an inverse-U relationship between the intellectual property rights and innovation.