The Review of Economics and Statistics Vol. 93 No. 1 2011
Patent Protection, Market Uncertainty, and R&D Investment
open access
Abstract
The main reason governments grant patent protection is to spur innovation. However, the size of the R&D stimulus from patent protection is far from clear because it depends on how effective patents are as a mechanism for appropriating returns. Drawing on real options investment theory, this paper highlights one mechanism through which patents may improve appropriability and stimulate R&D investment: patents reduce the effect of market uncertainty on the firm’s investment decision. We find that firm-level R&D investment falls in response to higher levels of uncertainty, but that patent protection partially mitigates the influence of uncertainty.
- DOI
- 10.1162/rest_a_00069
- Volume
- 93
- Issue
- 1
- Pages
- 147-159
- Language
- en
- Sources
- crossref openalex