Intellectual Property and Competition. New Working Paper by WIFO Economist Michael Peneder

Michael Peneder

28.03.2019

Intellectual Property and Competition

New Working Paper by WIFO Economist Michael Peneder

In a new WIFO Working Paper, WIFO economist Michael Peneder and his co-authors examine the question of whether intellectual property rights promote or hinder competition. The research is based on extensive company data for Switzerland from several phases of the KOF Innovation Survey from 1999 to 2015. The estimated structural equations show two opposing effects.

At the level of economic sectors, intellectual property rights increase the average number of competitors. This is due to the fact that more companies are able to survive independently on the market if the economic returns from their own innovations can be easily appropriated. For the given supplier structure, however, it can also be seen that at the micro level of microeconomic decisions own patents contribute to reducing the number of direct competitors for the company's main product.

The estimated results confirm the hypothesis of an "inverted U" for the simultaneous effect of competition on the company's own research expenditure. This means that additional competition with initially low intensity of competition leads to more innovation efforts, whereas with already high intensity of competition it reduces the incentives for own research and development.