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The role of business locations in international patenting

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Abstract

Despite the importance of international patenting in understanding technology diffusion across countries, it is unclear how business locations affect firms’ international patenting behavior. This paper investigates the impact of business locations on international patenting using data from the Management, Organization and Innovation survey 2009 with a representative sample of 1508 firms from twelve countries. Several findings emerge from our analyses. First, firms outsourcing abroad tend to patent abroad but not at home. Second, firms are more likely to patent at home when facing foreign competitors. Third, when facing domestic competitors, firms are less likely to apply for patents. These findings imply that firms use patents to compete against foreign competitors.

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Notes

  1. A good innovation here can be understood as an innovation that satisfies the patentability requirements, e.g., novel, non-obvious and useful.

  2. As the focus of the paper is firms’ patenting behavior, the innovation can be thought as a representative innovation the firm has. In the empirical analysis, a firm’s patenting decisions are defined in dummies and do not need information about how many innovations a firm has. Therefore, this part describes a firm-level model.

  3. It is possible that benefits stemming from an invention vary on the basis of firm experience and industrial sector of activity. In this conceptual framework, we do not consider the variation of innovation values across firms and assume they are only affected by the markets.

  4. The process of granting patents to bad innovation can be complex in reality. For example, whether a patent is granted depends on the quality of the innovation. As this paper aims to link competition to firms’ locational patenting propensity, \(\psi ^l\) is assumed to be an exogenous process and varies only across countries (patent offices).

  5. See Bloom et al. (2012) for details about the MOI survey.

  6. A country’s openness is measured by the ratio of the country’s exports plus imports over GDP. We get this ratio for these twelve countries for the period 2005–2009 from the World Bank and then calculate the mean value for each country. Based on the ranking of the mean values, we identify the first six countries as relatively open countries and others as relatively less open countries.

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Authors and Affiliations

  1. School of Economics, Jinan University, Guangzhou, China

    Di Fan

  2. Center for Economics, Finance and Management Studies, Hunan University, Changsha, China

    Long Zhao

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  1. Di Fan
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  2. Long Zhao
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Correspondence to Long Zhao.

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The authors thank the editor Professor Giacomo Corneo, an anonymous reviewer, for their constructive feedback, and the Enterprise Analysis Unit of the Development Economics Global Indicators Department of the World Bank Group for making the data available. Long Zhao acknowledges the financial support from the Research Funding of Hunan University under grant 531118010625.

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Fan, D., Zhao, L. The role of business locations in international patenting. J Econ 139, 43–69 (2023). https://doi.org/10.1007/s00712-022-00811-w

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