What do Firms Gain from Patenting? The Case of the Global ICT Industry.

Abstract

This study investigates the relationship between patenting activity, productivity, and market competition at the firm level. We focus on the Information and Communication Technology (ICT) industry as a particular case of an innovative sector whose contribution to modern economies is pivotal. For our purpose, we exploit financial accounts and patenting activity in 2009-2017 by 179,660 companies operating in 39 countries. Our identification strategy relies on the most recent approaches for a difference-in-difference setup in the presence of multiple periods and with variation in treatment time. We find that companies being granted patents increase on average market shares by 11%, firm size by 12%, and capital intensity by 10%. Notably, we do not register a significant impact of patenting on firms' productivity after challenging results for reverse causality and robustness checks. Findings are robust after we consider ownership structures separating patents owned by parent companies and their subsidiaries. We complement our investigation with an analysis of market allocation dynamics. Eventually, we argue that policymakers should reconsider the trade-off between IPR protection and market competition, especially when the benefits to firms' competitiveness are not immediately evident.