How Private Property Protection Influences the Impact of Intellectual Property Rights on Economic Growth?

Although policy-makers typically assume a positive relationship between intellectual property rights (IPRs) and economic growth, the empirical evidence on the IPR–growth relationship is rather inconclusive. We conjecture in this paper that the weak IPR–growth evidence in previous studies may be due to a neglect of the role of finance markets and private property rights. Our conjecture is motivated by the recent law-and-finance literature. We test our conjecture with a cross-section of 98 countries and find that once we modify our measure of IPRs to take into account general property rights, there is stronger evidence for a positive relationship between IPRs and economic growth. Our findings not only help explain the IPR-innovation puzzle but also have significant theoretical as well as policy implications.