Patent policy and relationship between innovation and monopoly power: Evidence from indian high and medium technology industries

Abstract

India strengthened its patent policy by complying with the Agreement on Trade-Related Aspects of Intellectual Property Rights. These changes in the policy influence firms’ incentive to engage in innovation activities and concomitantly the competition in the market. This study analyzes the impact of patent policy change on a two-way relationship between innovation and monopoly power by utilizing firm-level panel data of 686 high and medium technology firms over 1995-2015. Findings suggest that there is a nonlinear impact (inverted U-shaped) of monopoly power on patenting in the post-TRIPs regime. Further, as expected, patenting positively influences the firms’ monopoly power in both pre- and post-TRIPs regime. While investigating the nonlinear impact of patenting on monopoly power, we also found the inverted U-shaped relationship during the transition phase of policy change (1995-2005). We conclude that the patent policy change has a significant impact on the innovation and monopoly power relationship in Indian firms. © Springer Nature Singapore Pte Ltd. 2020.