Patent Tigers: The New Geography of Global Innovation

It is widely argued that international extension of the patent system hinders innovation and growth in developing countries by restricting access to technological inputs. I re-examine the connection between patents, innovation and development by assessing the extent to which the U.S. patent regime supports R&D investment by firms in certain emerging market countries. Based on USPTO data covering all utility patents issued to U.S. and foreign inventors (a total of 6,122,217 patents issued to inventors resident in 188 countries and territories) during 1965-2015, and supplemented by additional data sources, I argue that the U.S. patent system has supported innovation in a cluster of foreign countries that have developed rapidly and dramatically since the 1980s. The increase in the proportion of foreign (and especially, East Asian) innovators in the USPTO patentee population is so large that it accounts for much of the significant increase in USPTO patent issuance that has commonly been attributed to policy changes by U.S. courts and the USPTO. Within this expanded foreign patentee population, 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 salient 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 rely on USPTO patents to extract value from their R&D investments by supplying product or process inputs to the global value chains that connect innovation sources with commercialization sources on the pathway to target consumption markets. While prior work has presented evidence 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 and human capital but have small domestic markets in which to extract returns on that capital. For those countries, the patent system (or at least the U.S. patent system) is an aid, not a hindrance, to development.