GEP Seminar: Joel Stiebale (Heinrich Heine University)

Gains from patent protection: Innovation, market power and cost savings in India (with Apoorva Gupta) 

Abstract:  We study the effect of stronger patent protection on innovation activities of firms and firm-product level markups. Relying on cross-industry differences in the use of patents, we exploit firm-level variation in exposure to India’s patent reform, and find that the reform led to an increase in patenting and research and development expenditure for firms more exposed to stronger patent protection. Additionally, we estimate an increase in firm-product level markups after the reform, driven primarily by lower marginal costs rather than higher prices. Our results indicate that process innovations and output expansion contributed to these cost savings.