IPR infringement in the United States: impacts on the input and output of R&D

This paper examines the impact of intellectual property rights (IPR) infringement on the input (R&D spending) and output (patents) of the research process. The extant literature proxies IPR enforcement via composite indices or indicators of institutional quality, whereas this paper employs a direct (hard) measure of IPR crimes. Using data across U.S. states, results show that IPR crimes reduce research spending but do not impact patenting. Upon comparison with a broader measure of weak institutional quality (corruption), we find that greater corruption has a robust negative effect on patenting, but not on R&D spending. Quantitatively, the elasticities of R&D spending with respect to IPR crimes are greater than those of patents with respect to corruption, suggesting that studies that proxy IPR crimes via other measures are likely underestimating their impacts on technological change.