Walker Hanlon and Taylor Jaworski's new NBER working paper on IP ProtectionJuly 17, 2020
Intellectual property (IP) protection, achieved through mechanisms such as patents and copyrights, is a central feature of modern innovation systems. Yet there are important aspects of IP protection that remain poorly understood. One of these is the impact of offering protection to producers of one type of good on innovation rates in other complementary goods. In "Spillover Effects of Intellectual Property Protection in the Interwar Aircraft Industry", joint with Taylor Jaworski (U. Colorado), we take advantage of unique conditions in the aircraft industry in the 1920s and 1930s to examine how changes in the availability of IP protection to airframe producers impacted innovation in complementary aero-engine technologies. Our results reveal that, when IP protection is offered to producers of one good, there are important spillover effects on innovation patterns in complementary goods. We also show how these patterns can be explained by a simple theory in which IP protection shifts profits between producers of different types of goods, impacting the incentives for investments in new technology.
Walker Hanlon is an Assistant Professor of Economics at NYU Stern.
Read the full paper here.