Intellectual property rights and innovation: A panel analysis

We investigate the relationship between intellectual property rights (IPR) and innovation, for a panel of 48 countries between 1998 and 2011. Prior empirical studies mainly focus on strength of patent regulations largely ignoring the enforcement of such laws in practice. We employ a new index that accounts for the enforcement related component of the patent system and the Ginarte and Park (1997) index of patent regulatory strength. We thus include two crucial elements of a national patent system, the de jure position relating to book law and IPR regulations, and the de facto position relating to IPR enforcement. We consider nonlinearities between IPR and innovation, and we find that both nonlinearities and the enforcement aspect are significant in explaining the relationship between innovation and IPR systems.