Nonlinearities in the Intellectual Property-Manufacturing Growth Nexus in the Post-TRIPS Era: Evidence from a Dynamic Panel Analysis

Abstract

Discussions around the importance of intellectual property (IP) intensified at the height of the COVID-19 pandemic as countries raced to secure IP-protected goods (e.g., vaccines and medical equipment) necessary to respond quickly and adequately to the threat of the virus’ spread. Building on the growing strand of the literature that reexamines IP’s effect on an array of social and economic outcomes, this paper examines the relationship between quantitative (patents and trademarks) and qualitative (IP protection) measures of IP, on the one hand, and manufacturing growth, on the other hand, accounting for the presence of nonlinearities. Using a two-step system generalized method of moments (SGMM) approach on a panel dataset of 81 countries spanning the post-1995 TRIPS Agreement period, our estimates show that these alternative measures of IP have differential and nonlinear effects on manufacturing growth. In particular, patents have a positive significant marginal effect on manufacturing growth past a minimum scale, whereas trademarks do not have a significant effect. In contrast, stronger IPR protection has a positive effect only up to a critical level of IPR protection, implying that “too much” IPR protection can stifle growth-inducing competing innovation. The paper concludes with a brief discussion on the mechanisms through which IP may contribute to manufacturing growth, and on some policies, which may help realize this potential. Broadly, this paper speaks to academic and policy discussions surrounding optimal IP enforcement and the benefits and consequences of IP.