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International patenting decisions: empirical evidence with Spanish firms

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Abstract

This paper analyses the determinants of firms’ decisions to patent abroad. We use data spanning 2005–2013 of Spanish firms from PITEC, a panel database carried out by the INE (The National Statistics Institute). We focus on patenting firms and consider that firms’ decisions to apply for patents in foreign patent offices may be driven by two kinds of motivations: first, to exploit the patent in international markets where there is potential demand for the invention and, second, to protect the invention abroad when the quality of the invention is high enough. In the first case we refer to market-driven determinants and, in the second case, to innovation type-driven determinants. We empirically analyse these factors using information on firms’ sales in different geographic international markets, and also indicators of the quality and scope of the innovations. We distinguish among EPO, USPTO and PTC patents, and estimate, first, a multivariate probit model to determine the factors underlying the decision to apply for patents in these foreign offices. Second, we estimate a multivariate model to explain the shares of patent applications in each one of the offices.

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Fig. 1

Notes

  1. We do not use the data for 2003 and 2004 due to enlargement and restructuring of the sample of firms in the survey after 2004.

  2. The Patent Cooperation Treaty is an international agreement, administered by the World Intellectual Property Organization (WIPO), for filing a single application that is valid in more than 150 member countries. Although the PCT system is, properly speaking, a patent filing system rather than a patent office, we shall refer to it as another of the ‘patent offices’ mentioned throughout the paper. A patent application filed under the PCT is called an international patent application. The purpose of the PCT is making it easier and initially cheaper to file a patent application in a large number of countries. By filing through the PCT process the firm can embark on the path to seek patent protection for an invention simultaneously in every country that is a member to the Treaty (see details in http://www.wipo.int/pct/en/).

  3. Notice that the percentages in Fig. 1sum up more than 100 since there are firms filing for patents simultaneously in several patent offices.

  4. Up to thirty-five countries can be designated on an EPO patent application. However, we do not have information on the number of individual European countries applied for by each firm. The European patent procedure is more expensive than direct application in a single country patent office. As a rule, however, the European patent coverage per country is cheaper than a single national patent application if the firm seeks patent protection in at least three European countries (Licht and Zoz 1998).

  5. According to De Rassenfosse and van Pottelsberghe de la Potterie (2013), who survey patent fees on a number of patent offices worldwide, patent fees play an important role in determining the demand for patents.

  6. There could be also some room for strategic international patenting pursuing blocking competitors from using technologies, the use of patents for negotiation with rivals for technology access, or as signals of firms’ market value to have access to capital markets (see, e.g., Blind et al. 2006). An empirical analysis of the strategic use of patents by firms is Hall and Ziedonis (2001), who showed that patenting rose sharply in the 1990s in the US semiconductor industry in response to the risk of hold up generated by patent “thickets” (fragmentation of patent rights). Noel and Schankerman (2013) analyse the strategic patenting behaviour in the US computer software industry, focusing in particular in the accumulation of patents as a way to increase bargaining power with regards technology rivals, and in patent thickets, showing that these two strategic patenting activities affect innovation and market value of software firms. The analysis of these strategic issues is out of the scope of the paper.

  7. Dosi et al. (1990) estimated trade and patent flows among a number of OECD countries and found that cross-country patenting was positively associated with trade flows. Eaton and Kortum (1996) also empirically observed among OECD countries that exports had a significantly positive impact on the number of patents filed in target countries. Guellec and van Pottelsberghe de la Potterie (2001), using data on 29 OECD countries, found that international patent-related indicators are positively correlated with openness to external trade (imports and exports relative to GDP). Yang and Kuo (2008) provide an empirical investigation on the national outbound of international patenting using cross-patenting from 30 countries in the World Intellectual Property Organization (WIPO) between 1995 and 1998, and found that international patenting is strongly and positively associated with trade related factors, such as exports and FDI.

  8. An alternative panel data source providing information on patenting at the firm level is the ESEE (Encuesta sobre Estrategias Empresariales, Fundación SEPI). However, this data source does not allow distinguishing among international patent applications to different geographical areas. A recent analysis using this data source for Spanish firms’ patents can be found in Beneito et al. (2014).

  9. A description of the survey can be found at the following link (in Spanish): https://icono.fecyt.es/pitec.

  10. In the Appendix we provide a detailed definition of all the variables used in our analysis. We also specify which variables correspond originally to a 3-years period and which variables are originally annual and we calculate its average over a 3-years period.

  11. PITEC does not provide information on patent applications to other individual countries patent offices. However, EPO, USPTO and PCT represent the bulk of foreign patent applications by Spanish firms.

  12. Empirical works using data from the Community Innovation Surveys (CIS) have extensively used firms’ innovative sales as one of the preferred measures of innovation outcomes. Innovative sales from products new to the market are considered as indicative of innovation outcomes of higher scope than those corresponding to products new to the firm. Bloch and Graversen (2008) investigate the characteristics of this measure and how well it works in empirical analysis. The authors conclude that, although with its own shortcomings, a measure of innovative sales is a usable proxy of ‘economically valuable knowledge’.

  13. Although the percentage of PhD holders could be also capturing the high technological level of the sector where firms operate, we expect this effect to be controlled for with the industry dummies included in estimation.

  14. See Beneito (2006) for arguments that support the different characteristics of the R&D projects undertaken by firms pursuing innovations of more radical nature as compared to those of more incremental content. In particular, the author finds that in-house developed R&D is significantly more conductive to radical innovations than externally contracted R&D. Also more recently, Añón-Higón (2016) finds that conducting internal basic research helps firms to bring new products into the market ahead of competitors, and contributes to innovation performance.

  15. Firms are asked to report the total number of different patent applications and the patent applications in each patent office. Unfortunately, when reporting the number of patents to the different patent offices, we do not have information on whether these patent applications refer to the same invention or not, and this lack of information could explain part of the simultaneity of patent applications in different patent offices.

  16. The percentage of sales from products that are new to the firm but not to the market is also slightly higher for firms applying for patents abroad.

  17. Note that EPO, USPTO and PCT patents may be considered as covering three different geographical areas, namely, Europe, US and the rest of the world, respectively, and, therefore, we could think of them as different international strategies that Spanish firms may follow when deciding to apply for patents abroad.

  18. If a proportional variable y is assumed to be logit-linear, then its logit transformation is assumed to be normally distributed \({\text{log}} (\frac {y}{1-y}) \sim {N (\mu, \sigma^{2})}\). The logit transformation only works for values that fall between zero and one. Zeros and ones are undefined. Thus, we need to ‘winsorize’ these observations, making all of them slightly more than zero and slightly less than one.

  19. Assume nit stands for the proportion of the firm’s total number of patents that have been applied for in EPO in that period. Then, if β is the coefficient associated to a given explanatory variable x, it follows that: \(\Delta \% (\frac{EPO patents}{non{\text{-}}EPO patents})=({\text{exp}}(\beta \cdot \Delta x)-1)\times 100.\)

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Acknowledgements

We are grateful for the constructive comments from two anonymous reviewers and from the Journal invited editors. We also thank useful comments and suggestions received from participants at the XXXI Jornadas de Economía Industrial (Pamplona, Spain, 2017). This work was supported by the Spanish Ministerio de Economía y Competitividad [ECO2014-55745-R and ECO2017-86793-R]; Fundación-BBVA, Programa de Ayudas a Proyectos de Investigación en Socioeconomía, 2014; and Generalitat Valenciana [PROMETEOII/2014/054]. Usual disclaimer applies.

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Correspondence to Pilar Beneito.

Appendix

Appendix

See Table 7.

Table 7 Variable names and definitions

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Beneito, P., Rochina-Barrachina, M.E. & Sanchis, A. International patenting decisions: empirical evidence with Spanish firms. Econ Polit 35, 579–599 (2018). https://doi.org/10.1007/s40888-018-0105-7

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