Innovation and competition: An unstable relationship

This paper analyzes how the establishment of the United States Court of Appeals for the Federal Circuit in 1982 has affected the relationship between innovation and competition. Using the same dataset as Aghion et al. (Competition and innovation: an inverted-u relationship. Quarterly Journal of Economics 2005; 120(2):701728) I find a structural break in the early 1980s. Taking this break into consideration, the inverted-U empirical relationship between innovation and competition found by Aghion et al. does not hold. In fact, I find that there is a positive innovationcompetition relationship during the period 19731982 and no relationship at all in the 19831994 period. Copyright (C) 2011 John Wiley & Sons, Ltd.