Innovation and the Global Economy: An Investigation of Critical Challenges for Intellectual Property, Strategy, and Policy in IT and Beyond

Start Date: 2010 End Date: 2013
PIs: Fernando Manuel Ribeiro Branco (CLSBE), Francisco Lima (IST/UTL), and Lee Branstetter (CMU)

Dual Degree Ph.D. Students: Andreia Barros Rafael (Technological Change and Entrepreneurship), and André Regateiro (Technological Change and Entrepreneurship) 

Team: Universidade Católica Portuguesa (UCP), Instituto Superior Técnico/ Universidade Técnica de Lisboa (IST/UTL), Carnegie Mellon University

Keywords: Innovation; Globalization; Intellectual Property; Information Technologies

Globalization and technological change have reshaped economic activity around the world. Increasingly, these two phenomena are intertwined – R&D is becoming more global, and the forces of global competition are shaping patterns of R&D activity. This research project will explore how these changes are impacting innovation strategy and policy for firms and regions, with a particular focus on globalization and technological change in the information technology industry. One important aspect of change has been the rapid growth of patenting in emerging markets. In recent years, inventors in South Korea, Taiwan, and Israel have vastly increased their numbers of patent grants from the U.S. and European Patent Offices. Preliminary analysis suggests this surge has been driven by the emergence of firms in these countries as global competitors in technology intensive industries, especially those associated with information technology. These firms are protecting their growing investments in technology by accumulating a global portfolio of patents that cover key inventions in all major markets. We will closely examine this phenomenon and derive lessons for other regions and countries, including Portugal, which has had a low level of patenting.

The second development we will examine is a reverse impact of the globalization of innovation on the patenting strategies of firms in established markets, especially the US IT sector. High R&D intensity and a rapid pace of technical change have always characterized IT. But, early in the industry, patents were not regarded as particularly effective or important. US firms were also the clear industry leaders. During the 1980s, this shifted substantially. In that decade, incumbent firms in IT were contending with increasingly intense competition from Asian firms with much lower marginal costs. Eschewing patents was no longer viable, because direct imitation of Western products was now not only possible, but profitable for this new group of entrants. We expect this research to shed useful light on when and under what circumstances innovation can proceed with limited reliance on patents and when and under what circumstances leading firms will find some degree of reliance on patents all but unavoidable.

The third development is the growing globalization of R&D. The geography of innovation is shifting, and emerging economies in areas like China or Eastern Europe are beginning to play an increasingly important role in the global innovation system, and this shift is especially pronounced in the IT industries. Countries like China are still in the early stages of this conventional development process, yet they are already hosting R&D centers of the world’s technologically elite firms. Leading IT firms are at the forefront of this shift of R&D to China, and the patents generated by multinationals in China are disproportionately concentrated in IT. And what does the explosion of patents in these emerging economies imply for economies like Portugal, whose relatively higher wages belie a level of R&D investment and patenting that remains quite low? We find that a large and growing fraction of these patents are created by teams of researchers based in different countries combining their skills and knowledge. Preliminary analysis suggests the R&D process can increasingly be disaggregated into multiple stages, each located where they can be undertaken at lowest cost. We expect our analysis to produce useful lessons for a country like Portugal in terms of knowing how to participate in this emerging global division of R&D.

A fourth development looks at the diffusion of knowledge from universities to the broader economic system. An extensive literature has used the citations in patent documents to trace the impact of particularly important scientific breakthroughs or major inventions on the subsequent innovative activity of inventors in related fields. However, this analysis does not appear to show much of a linkage between university-based scientific research in electrical engineering, solid state physics, materials science, software, computational linguistics and other scientific disciplines traditionally associated with the IT revolution, and industrial research in IT. Is academic science in these disciplines less impactful than we thought? Our research aims to explore an alternative hypothesis: academic science is important, but the rapid pace of patenting in IT means that new ideas originating in academic science are quickly “carried” into industrial practice by patents and, from that point on, subsequent inventors around the globe cite the patent that built on the scientific article rather than the article itself. By analyzing citation chains for inventions in IT, from recent patents to early patents to the papers cited in the early patents, we can trace out the impact of academic science on industrial activity in key areas of IT much more completely than have prior researchers who focused on only direct citations.

The research proposed here addresses novel and critical questions linking innovation in a global economy, the creation and development of intellectual property to protect inventions in multiple markets, and fundamental shifts in the information technology industries.

Presentation about this project pdf ("ICT Portugal Workshop: New Projects in Networks, Software, Energy and Security", March 2011)