Protection of intellectual property to foster innovations in the service sector
Masayuki Morikawa 20 July 2014
Innovation is a key driver of productivity growth, but innovation in the service sector has received relatively little attention. This column shows that the total factor productivity gap between Japanese firms with and without innovations is larger in services than in manufacturing. Whereas the percentage of firms holding patents is much higher in manufacturing than in services, trade secrets are just as important in both sectors. These results suggest that the protection of trade secrets makes an important contribution to productivity growth.
Given the declining labour force due to population ageing, accelerating the productivity growth of industries – especially the service industries – is an important element of the growth strategy in Japan and most advanced countries. While there are a variety of factors affecting productivity, innovation is one of the key determinants of productivity growth. However, innovation in the service sector has not been studied well. I present findings on innovation in the service sector by focusing on the effect of intellectual property rights on innovation.
Productivity and Innovation
R&D, growth, productivity, patents, Japan, innovation, services, intellectual property, trade secrets
Did the internet prevent all invention from moving to one place?
Chris Forman, Avi Goldfarb, Shane Greenstein 23 May 2014
The diffusion of the internet has had varying effects on the location of economic activity, leading to both increases and decreases in geographic concentration. This column presents evidence that the internet worked against increasing concentration in invention. This relationship is particularly strong for inventions with more than one inventor, and when inventors live in different cities.
Reading the technology press, it often seems as if the media think all high-tech invention happens in Silicon Valley. This parochial viewpoint highlights the ‘agglomeration’ advantages that the Valley provides to inventors because so many technology firms are located in the same place. These advantages include easier access to funding from local venture capitalists, sharing of fixed costs such as specialised patent lawyers, and easier exchange of ideas between researchers.
Frontiers of economic research Productivity and Innovation
patents, information technology, technology, agglomeration, internet, economic geography, invention
Quid pro quo: Technology capital transfers for market access in China
Thomas Holmes, Ellen McGrattan, Edward C. Prescott 08 November 2013
Why are FDI flows between China and technologically-advanced countries surprisingly small? This column analyses the issue in light of China's quid pro quo policy that makes technology transfer a precondition of foreign firms selling in China. We find that the policy provides significant gains for China, but losses to its FDI partners.
Over the past two decades China’s economy has grown rapidly and the nation has become a major destination for foreign direct investment. Surprisingly, little of China's FDI inflows come from technologically advanced, dominant players in global investment such as the US, Europe, and Japan (Prasad and Wei 2007, Branstetter and Foley 2010). Moreover, while there has been an explosion of patenting in China by domestic applicants, FDI outflows from China to the US, Europe, and Japan remain small.
Global economy International trade
China, patents, FDI, intellectual property rights
Does education lead to more innovation?
Otto Toivanen, Lotta Väänänen 21 July 2013
Policymakers are worried that the number of inventors coming from the West is dwindling. Is the rising cost of higher education putting off innovative individuals? And are China, India and other emerging economies right to invest so heavily in academic subjects that produce inventors? This column argues that the number of inventors can be increased through the right educational policy. New research based on data from Finland and the US provides a justification for the policies adopted by emerging economies, and for Western policymakers’ worries about the decline of interest in Engineering and Science.
There is a broad, research-based consensus amongst academic researchers, policymakers and pundits that the key to economic growth lies in improving productivity. There is also wide agreement that productivity increases come through innovation. As Charles Jones argues: “[t]he more inventors we have, the more ideas we discover, and the richer we all are” (2005). This immediately leads to the following policy question: (how) can the number of inventors be increased?
Productivity and Innovation
The global race for inventors
Carsten Fink, Ernest Miguelez, Julio Raffo 17 July 2013
Migration is a hot-button issue across the globe. This column summarises new evidence on the patterns of skilled-worker migration, focusing on the specific case of inventors. A novel data source that traces worldwide migration flows for inventors suggests that, excluding a few nuances, the economic incentives for general migration also seem to influence inventors’ migration decisions.
Many countries are currently debating and reforming their immigration policies. One prominent question in these discussions is how to attract skilled workers that can ease domestic skills shortages and foster innovation and entrepreneurship.
Migration Productivity and Innovation
patents, innovation, migration, inventors
Do patent rights impede follow-on innovation?
Alberto Galasso, Mark Schankerman 14 May 2013
Do patents encourage innovation? This column presents a new analysis, suggesting that patent rights block cumulative innovation only in very specific environments. To encourage innovation, remedial government policies should be targeted; a ‘broad based’ scaling back of patent rights is unlikely to be appropriate. Policies and institutions should facilitate more efficient licensing, promoting cumulative innovation without diluting the innovation incentives that patents provide.
The patent system is one of the main instruments governments use to increase research and development incentives, while at the same time promoting follow-on innovation. However, there is growing concern among academic scholars and policy makers that patent rights are themselves becoming an impediment, rather than an incentive, to innovation.
International trade Productivity and Innovation
Cumulative innovation and market value: Evidence from patent citations
Sharon Belenzon 03 July 2012
According to the received wisdom, innovation is the heart-and-soul of modern growth but incentives to innovate are prone to the free-rider problem. This column partly supports that view. Looking at over 1,000 US companies it shows that internal citations of a firm's patents have a positive effect on market value while external citations have a negative effect.
Knowledge spillovers play a critical role in economic growth. For example, x-ray-computed tomography technology was developed and patented by EMI, which was able to exploit it initially. However, it also inspired hundreds of subsequent inventions by firms such as Pfizer, Syntex, Picker, and General Electric. A few years later these firms dominated the computed tomography scanner market, forcing EMI to drop out.
Productivity and Innovation
US, patents, knowledge spillovers, inventions
Is the dragon learning to fly? An analysis of the Chinese patent explosion
Zhihong Yu , Markus Eberhardt, Christian Helmers 27 September 2011
The number of domestic patent filings in China increased at an annual rate of 35% from 1999 to 2006. But the reasons behind this ‘patent explosion’ are unclear. By compiling a new dataset of 20,000 Chinese manufacturing firms, this column shows that the explosion has been ignited by the ICT sector.
China’s economic success over the past three decades has been widely regarded as the result of its ability to produce manufactured goods at low cost, building on the availability of cheap labour and scale economies, while relying on existing (albeit in part advanced) technologies of production. China’s ability to upgrade its technology-base and its moving up the value-chain has been widely regarded as hampered by weak (intellectual) property rights enforcement (Zhao 2006).
International trade Productivity and Innovation
China, patents, intellectual property rights
Another reason for the EU patent: Declining validation rates
Bas Straathof, Sander van Veldhuizen 09 December 2010
Barely 20% of European patents are validated in smaller EU member states – and this share is falling. This column argues that low validation rates are problematic for two reasons. They shelter firms from technological competition and they make a country less attractive to foreign innovators. It concludes that the introduction of the EU patent would solve these issues.
In a couple of weeks the European Council will decide on the implementation of the EU patent. This is the last chance in the foreseeable future to overcome the deadlock in the negotiations on harmonising the patent law. Following the many objections to patent law reform in the past, this time Spain and Italy are demanding that EU patents be translated in Spanish and Italian, in addition to the three official European languages, English, French, and German.
EU institutions EU policies International trade Productivity and Innovation
Italy, patents, Spain, EU patent
On the consequences of an EU patent for inventors and patent offices
Bruno van Pottelsberghe de la Potterie, Jérôme Danguy 14 July 2010
For more than 40 years, many governments and professional associations have acted, voted, or lobbied against the implementation of the EU patent. This column argues that the EU patent would drastically reduce patenting costs for applicants and generate more income for both the European Patent Office as well as most national offices, all the while saving €120 million in legal fees.
From a “European Union” perspective, the European patent system is highly fragmented. Indeed, it is actually a sum of 27 national patent systems – once a patent is granted it must be upheld, managed, and enforced at the country level. In case of litigation, it is frequent for applicants to be involved in several parallel litigations, with different outcomes across countries.
EU institutions Productivity and Innovation
patents, EU patent