Working Paper No. 02-06

Intellectual Property Rights and Innovation in Developing Countries
Yongmin Chen and Thitima Puttitanun
May 2002

ABSTRACT

This paper studies the relations between intellectual property rights (IPRs) and innovation in developing countries. While weak IPRs facilitate the imitation of foreign technologies, stronger IPRs encourage domestic innovative activities. A model is developed to illustrate how this trade off may affect a developing country's choice of IPRs. It is shown that innovations in a developing country increase in its IPRs, and a country's IPRs can depend on its level of development in a non-monotonic way, first decreasing and then increasing. We evaluate these theoretical results emprically, using a panel data set including 64 developing countries over the 1975-1995 period. The empirical evidence confirms the positive impact of IPRs on innovations in developing countries, and suggests the presence of a U-shaped relationship between IPRs and economic development.

JEL classification: O34, O1.
Keywords: intellectual property rights, innovation, economic development.

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