Differential effects of intellectual property rights on innovation and economic performance: A cross-industry investigation

Despite many previous studies, the causal relationship among intellectual property rights (IPR) protection, innovation and economic growth remains ambiguous. Focusing on the differential effects of stronger IPR on industries, we suggest four causal paths from IPR through R&D to economic performance. Using firm-level panel data in semiconductor, pharmaceutical and shipbuilding industries in Korea, we find that effective causal paths vary not only by industry but by firm size. Stronger IPR are beneficial to R&D-intensive industries where large domestic firms have strong R&D and IPR capabilities, but have no impact on globalized industries. On the other hand, stronger IPR are detrimental to industries and to small and medium enterprises (SMEs) characterized by limited resources. Thus, to boost innovation and economic growth, IPR policies need to be customized to industries as well as SMEs. Universally strong IPR policies are likely to discourage innovation and growth, causing some industries to suffer.