Appropriate
Intellectual Property Protection and
Economic Growth in Countries
at Different Levels of Development
Yee Kyoung Kim,
Keun Lee,*(Seoul Nat.Univ)
Walter G. Park,
& Kineung Choo
Outlines
• Research Agenda
• Conceptual Framework
• Cross-Country Analysis (1975-2003)
• Firm-Level Analysis using Korean Firm Data (1970-1995)
• Conclusions
Research Agenda
• To address the role of intellectual property rights (IPRs) in the economic growth
of countries at different levels of economic development.
• Different policies or institutions are appropriate for countries at different levels
of economic development: (Lee &Kim 2009 World Devel.)
• A contribution to the empirical literature on the effects of intellectual property
protection on innovation and economic growth, focusing on the relative roles of
patents and utility models.
• Our empirical analysis utilized country level and firm level data.
• What matters to innovation and growth is not only different strength of IPRs but
also the types of protection (patents vs. utility models)
IPR Protection
Inventive
Innovations
Utility Models
Imitative
Innovations
Utility Models (Petit Patent) vs Patents
• Utility models are second-tier protection for minor inventions,
- such as devices, tools and implements
• Processes or methods of production are typically excluded. The duration
of protection is typically 6 - 10 years and the technical details must also
be disclosed.
• Utility models are generally less expensive to apply for and do not require
substantive examination (for novelty, non-obviousness, and industrial
applicability).
• The inventive step required is small;
• the invention typically must exhibit a practical or functional advantage
over existing prior art. See Bently and Sherman (2001) for a legal
discussion of utility models.
• cf) Regular patents: novel, non-obvious; industrial
applicability.
• typically granted for 20 years ; cover products and processes,
• undergo substantive examination, and are costly to obtain .
Conceptual Framework (a model)
``
(1) We examine both conventional patents and utility models as potential
determinants of innovation and economic growth;
(2) We control for the income group or technological capabilities of different
countries; and
(3) We utilize both country-level and firm-level panel data of South Korea
Utility patents vs. Invention patents in Korea
• Early days of catch-up: petit (utility) patents > regular (invention) patents
• Later stage of catch-up: petit patents < regular patents
Utility vs. invention patent
2) Utility Patents
2) Invention Patents
50,000
45,000
40,000
35,000
25,000
20,000
15,000
10,000
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
5,000
1960
Number
30,000
Previous Literature
• Previous empirical studies focus on how the strength of intellectual property
protection – particularly patent protection – relates to innovation and growth,
not on the nature of the instrument used to protect innovation.
•
•
•
•
•
Direct effect on economic growth : Gould and Gruben (1996), Falvey et al. (2006)
Indirect effect on economic growth: Park and Ginarte (1997), Thompson and Rushing
(1999)
Panel estimation on determinants of growth: Varsakelis (2001) and Kanwar and Evenson
(2003), Chen and Puttitanun (2005), Schneider (2005)
These empirical studies deal with patent protection and not with alternative forms of
industrial property rights, such as utility models.
Anecdotal evidence on utility model such as Kumar (2002), The World Bank (2002),
Evenson and Westphal (1995, p. 2288) and formal evidence of utility models’ impacts on
Japanese TFP (Maskus and McDaniel, 1999)
Utility Models vs. Patents
Utility Models
Patents
Second-tier protection for minor inventions;
The inventive step required is small; a
practical or functional
advantage over existing prior art
Granted for inventions that are novel, nonobvious, and have industrial applicability
Processes or methods of
production are typically excluded
Cover products and processes,
Typically 6 – 10 years duration of protection
20 years duration from the date of application
Less expensive to apply for and
do not require substantive examination
Undergo substantive examination, and are
costly to obtain (filing fees, search
and examination fees, attorney costs, and
translation fees, where applicable)
Countries w and w/o utility model system
Logit Regressions on utility model adoption:
=> it is exogenous: not sig. on income levels
Full sample
(1)
(Log of GDP pe
r capita)t
High income Mid/low incom
Full sample
countries
e countries
(2)
(3)
(4)
0.0399
-0.188
-0.0791
(0.381)
(-0.441)
(-0.457)
(5-year average
GDP per capita
growth) t
French legal
origin dummy
German legal
origin dummy
Constant
Time dummies
Log Likelihood
Wald Chi2
p-value
Observations
High income Mid/low incom
countries
e countries
(5)
(6)
0.307
1.436
0.285
(0.417)
(0.790)
(0.341)
2.617***
1.936***
3.114***
2.605***
1.805***
3.103***
(9.249)
(4.076)
(7.233)
(8.903)
(3.561)
(7.611)
3.783***
3.346***
3.710***
3.703***
3.354***
3.827***
(9.355)
-4.968***
(-5.566)
Yes
-287.6
181.40
0.00
672
(6.970)
-1.327
(-0.323)
Yes
-92.76
69.18
0.00
214
(5.270)
-5.586***
(-4.178)
Yes
-188.3
105.80
0.00
458
(8.942)
-3.446***
(-9.868)
Yes
-254.7
142.00
0.00
545
(6.627)
-3.229***
(-5.281)
Yes
-77.45
57.40
0.00
175
(4.865)
-3.815***
(-8.021)
Yes
-174.1
84.90
0.00
370
Cross-Country Analysis (1975-2003)
DATASOURCE
UTILITY MODELS AND PATENTS : WIPO AND USPTO
IPR INDEX: WALTER G. PARK
OTHER CONVENTIONAL GROWTH VARIABLES: WDI
ESTIMATION METHOD
SYSTEM GMM
Cross-Country Analysis
Model 1: Innovation Equation
(Log of US patents granted)t-1
(Log of R&D intensity)t
(Log of no. of US PhDs per million)t
(Log of working age population)t
(Log of patent rights index)t
high income dummy*
(Log of patent rights index)t
Dependent variable:(log of US patents granted)t
OLS
FE
Sys GMM
OLS
FE
0.911***
0.647***
0.806***
0.909***
0.589***
(31.580)
(9.298)
(11.44)
(29.250)
(7.302)
0.0924*
0.0328
0.0431
0.0968*
0.0235
(1.704)
(0.382)
(0.343)
(1.674)
(0.271)
0.157***
0.155*
0.189**
0.191***
0.138
(4.602)
(1.831)
(2.607)
(5.012)
(1.538)
0.169***
2.082***
0.258***
0.171***
1.987***
(5.476)
(3.914)
(5.901)
(4.818)
(2.814)
-0.186
-0.125
0.191
-0.247*
-0.149
(-1.501)
(-0.644)
(1.048)
(-1.774)
(-0.615)
0.0926
0.577***
0.490**
0.241
0.549**
(0.536)
(2.679)
(2.231)
(1.279)
(2.283)
(utility models law dummy) t-2
high income dummy*
(Utility model law dummy)t-2
(Log of openness)t
high income dummy
Constant
Time dummies
R-squared
Hansen
AR2
Observations
0.697***
(4.194)
0.120
(0.633)
-3.649***
(-6.125)
0.018
(0.072)
0.000
()
-32.36***
(-3.896)
0.981
0.803
255
255
0.514**
(2.074)
-0.0299
(-0.115)
-4.615***
(-6.152)
0.88
0.48
255
Sys GMM
0.841***
(13.120)
0.0704
(0.677)
0.172**
(2.263)
0.214***
(4.344)
0.11
(0.656)
0.528**
(2.519)
0.141
(0.991)
-0.157
(-0.985)
0.411*** 0.157*
(4.047)
(1.688)
-0.377*** -0.202
(-2.809) (-1.403)
0.675***
(3.492)
-0.0773
(-0.333)
-3.383***
(-4.802)
Yes
0.981
0.0988
(0.359)
0
()
-30.59***
(-2.782)
Yes
0.783
216
216
0.586**
(2.048)
-0.259
(-0.964)
-3.975***
(-4.401)
Yes
0.76
0.29
216
Cross-Country Analysis 2: Growth Equation
Attention: Utility model intensity data; not available for many countries
=> utility model adoption dummy : that is why we need firm-level regressions
Dependent variable: (5-year average GDP per capita growth rate)t
No of country = 90
(Log; second. school enroll)t
OLS
-0.0556**
(-2.075)
-0.0137
(-1.511)
0.246***
(7.873)
0.0520**
(2.265)
FE
-0.151
(-1.411)
-0.0102
(-0.524)
0.209***
(2.645)
0.0245
(0.705)
SYS GMM
-0.106**
(-2.068)
-0.0387*
(-1.871)
0.448***
(6.275)
0.0499
(0.802)
OLS
-0.0501**
(-2.030)
-0.0129
(-1.167)
0.249***
(7.893)
0.0518**
(2.319)
FE
-0.156
(-1.472)
-0.0125
(-0.654)
0.210***
(2.656)
0.034
(0.964)
SYS GMM
-0.0965*
(-1.898)
-0.0217
(-0.889)
0.431***
(6.330)
0.161**
(2.099)
(utility models law dummy) t-2
0.014
(0.894)
0.070
(1.630)
-0.0107
(-0.270)
0.0145**
(2.303)
0.018
(0.889)
0.0319**
(2.371)
0.0482*
(1.830)
-0.054
(-1.610)
-0.004
(-0.447)
0.0207**
(2.052)
0.102**
(2.122)
-0.133***
(-2.671)
0.002
(0.125)
0.0460*
(1.666)
0.0907**
(2.014)
-0.075
(-0.935)
-0.027
(-1.167)
0.0953***
(2.705)
0.020
(0.484)
-0.472**
(-2.517)
Yes
0.401
0.000
()
0.621
(0.623)
Yes
0.234
-0.200
(-1.200)
-1.102***
(-2.752)
(Log of GDP per capita)t-1
(log of population growth)t
(Log of investment)t
high income dummy*
(Utility model dummy)t-2
(Log of patent intensity)t
High income dummy*
(log of patent intensity)t
High income dummy
Constant
Time Dummies
R-squared
Hansen
AR2
Observations
-0.395**
(-2.041)
Yes
0.380
299
0.671
(0.665)
Yes
0.221
299
-0.573
(-1.647)
0.32
0.34
299
299
299
0.6
0.68
299
Cross-Country Analysis
• Patents raise the cost of doing business and that this cost is more onerous for the
lower income developing countries.
• In contrast, utility models provide an alternative way for such economies to
create incentives for innovation, albeit incremental, without affecting the cost of
doing business adversely, and while providing the technological inputs
appropriate for local needs and economic growth.
Firm-Level Analysis
using Korean Firm Data (1970-1995)
DATASOURCE
UTILITY MODELS AND PATENTS : KIPRIS
OTHER FINANCIAL DATA: LEE ET AL. (2007, 2008)
ESTIMATION METHOD
SYSTEM GMM
Case Study: South Korea
The mid-80s as a turning point for Korea
• From the mid 180s, R&D/ GDP became higher than 1%,
with the rapid increase
Case Study: South Korea
The mid-80s as a turning point for Korea
•
•
Share of private R&D: more than half of the total R&D since the mid-1980s
No. of accumulated firm R&D centers: 3 (1967)14 (1976)  261 (‘86)  1162 (‘92)
Composition of R&D Expenditure in Korea
Establishment of Firm R&D Center
2. Individual vs. corporate patents
among Korean-residents patents
• Early days of catch-up: individual patents > corporate patents
• Later stage of catch-up: individual patents < corporate patents
Individual vs. corporate patents
among Korean-residents patent
3) Individaul (Korean)
3)Corporate (Korean)
30000
No. of patents
25000
20000
15000
10000
5000
0
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
Firm Level Analysis
Hypothesis:
Impacts of utility models and patents on firm performance
• Hypothesis : Impacts of utility models on firm performance
Firm growth during the pre-in-house R&D era is more positively associated with
minor inventions measured by the number of utility models and that is more
positively associated with patents during the post-in-house R&D era
Firm level Analysis
Hypothesis I: Impacts of Utility Models and Patents on Firm Performance
• For the whole period: patent dominates utility models
• Before 1986, utility models  Positive , Afterwards, patents  positive
Firm level Analysis
Hypothesis I: Impacts of Utility Models and Patents
on Firm Performance
• Limiting factors that make it difficult for firms to profit from their innovations
include the inability to prevent other firms from copying their technology, the
high cost of or limited access to capital and technology, the challenges of
putting a product into production in time, and the high cost of marketing (Lee et
al (2003)).
• Thus, firms that are at their early developmental stage with limited resources
may find incremental innovation more advantageous in helping to position
themselves in existing markets at low cost.
Firm level Analysis
Hypothesis : Learning Effect of Utility Models
• Hypothesis : Learning Effect of Utility Models
The capability for inventive innovations (patents) can be learned from the
accumulated experiences with the minor inventions/innovations (utility models).
i.e. to test whether knowledge acquired through past utility model applications
provide a stepping stone for further technological progress
Firm level Analysis
Hypothesis II: Utility Models as a Learning Mechanism
(3) Both utility models and patents have positive associations with the flow of
new patents
That is, the new patentable innovations of firms build upon their utility
model knowledge as well as their more inventive knowledge.
Conclusions
•
•
•
•
•
•
A contribution to the empirical literature on the effects of intellectual property
protection on innovation and economic growth, focusing on the relative roles of
patents and utility models.
Our empirical analysis utilized country level and firm level data.
The chief lesson is that what matters to innovation and growth is not only
appropriate strength of intellectual or industrial property rights, but also the
type of protection.
i.e., the design and strength of intellectual property systems should be tailored
to the indigenous technological capacities of firms in order to best provide the
appropriate incentives for innovation.
For example, utility model protection should be most useful to firms with low
technological capacities and limited resources.
For more developed firms and firms with better access to resources, such as
those in the more developed countries, patent protection plays a more
important role in the innovation process than do utility models.
• Thank You
• Q&A