Patent Tigers: the New Geography of Global Innovation
Abstract: It is widely argued that international extension of the patent system hinders innovation in developing countries by restricting access to technological inputs. I re-examine the connection between patents and innovation by assessing the extent to which the U.S. patent regime supports R&D by firms in emerging market countries. Based on USPTO data covering all utility patents issued to U.S. and foreign inventors during 1965-2015, and supplemented by additional data, I argue that the U.S. patent system has supported innovation in a cluster of foreign countries that have developed dramatically since the 1980s. Three smaller and late-developing countries are now (together with Japan) the most intensive foreign users of the U.S. patent system on a per-capita and per-GDP basis: Israel, South Korea and Taiwan. Based on entity type, industry type and other characteristics of the leading “first-named” assignees of USPTO patents in Israel and Taiwan during 2000-2015, and supplemented by other evidence relating to these countries’ innovation capacities and performance, I argue that these countries use USPTO patents to extract value from R&D investments by supplying product or process inputs to the global value chains that execute innovation and commercialization functions on the pathway to target consumption markets. While prior work has shown that patents sometimes promote entry into technology markets by upstream R&D firms that lack downstream production and distribution capacities, this paper extends that rationale and presents evidence that patents can promote entry into technology markets by economies that are rich in intellectual capital but have small domestic markets in which to extract returns on that capital.