The Use of Alternatives to Patents and Limits to Incentives

One of the most puzzling findings in the empirical analysis of firms’ patenting behaviour is the low proportion of patenting firms in the population of registered companies. Also, there is evidence suggesting that firms may not patent all patentable inventions and that this behaviour differs across firms within industries and across industries as well. Our study takes a closer look at the use of patents and alternative Intellectual Property (IP) mechanisms by UK firms, and the impact of such use on firm performance. We review the economic literature on the choice of IP protection, and then use a new and comprehensive dataset consisting of UK firms during the 1997-2006 period to examine the determinants and outcomes of the use of various IP protection mechanisms. The study is divided into four parts: a literature review, a descriptive analysis, a study of the strategic use of patents, and a multi-equation study of the relationship between IP choice, innovation and total factor productivity