Patent Protection,Innovation and Economic Growth:An Analysis Based on the Upstream and Downstream Technology Spillovers Model
Promoting innovation within the industrial and supply chains has emerged as a pivotal objective of China's patent protection policy.In practice,there exists a significant imbalance in patent protection across the supply chain,where some companies excessively leverage patent rights while others receive inadequate protection.For instance,some foreign companies have previously exploited standard-essential patents,and therefore have harmed Chinese companies.And some of China's small and medium-sized companies are particularly vulnerable to patent infringement due to insuffi-cient protection.This imbalanced patent system results in an inequitable distribution of profits across different segments of the supply chain,thereby stifling overall industry innovation.Consequently,this paper poses the overarching research questions:How can the patent system be optimized to effectively stimulate innovation and economic growth?This paper incorporates upstream and downstream technology spillovers into an endogenous economic growth model to examine the impacts of patent protection on innovation and economic growth.The theoretical analysis reveals an inverted U-shaped relationship between patent protection and innovation.Specifically,enhancing downstream patent protection increases the relative profitability of downstream sectors,thereby attracting skilled labor and fostering innova-tion there.However,this reallocation of skilled labor away from upstream sectors undermines upstream innovation and re-duces technology spillovers to downstream sectors,ultimately impeding downstream innovation.Similarly,strengthening upstream patent protection boosts innovation by reallocating skilled labor toward upstream sectors but simultaneously di-minishes technology spillovers from downstream to upstream sectors.Consequently,the divergent effects of technology spillovers and skilled labor allocation lead to an inverted U-shaped influence of patent protection on both innovation and economic growth.To maximize the rate of economic growth,patent protection should prioritize industries with substan-tial technology spillovers.The essential goal of optimizing the patent system is to achieve shared benefits through bal-anced upstream and downstream patent protection.Upstream patent protection can induce significant monopolistic distortions,because upstream companies increase their profits by restricting output to elevate prices,which shifts the entire industry's profits toward upstream companies and discourages innovation among downstream companies.Additionally,when upstream companies reduce the produc-tion of intermediate goods,it markedly lowers the total output.The government can mitigate the shortage of upstream in-termediate products by providing subsidies,to achieve a Pareto optimal decentralized equilibrium.Furthermore,in the numerical analysis section,the study calibrates overall R&D intensity and the relative R&D ex-penditures of upstream and downstream sectors to determine representative patent breadths across different countries.It indicates that developed countries possess a significantly broader patent breadth in downstream sectors than in upstream,sectors,whereas China exhibits a narrower gap.Numerical findings suggest that when technology spillovers between up-stream and downstream sectors are relatively balanced,China's patent protection system can facilitate the fastest eco-nomic growth.This section also simulates how patent breadth influences innovation,corroborating the inverted U-shaped relationship.In the extension section,we firstly explore the impact of patent protection on wage inequality,and discover that in-tensifying patent protection,particularly in downstream sectors,exacerbates wage inequality among workers.Secondly,from both relative and absolute perspectives,the effect of enhancing absolute patent protection depends on the existing levels of relative protection in upstream and downstream sectors.Thirdly,we compare the vertical production model with the parallel model,and demonstrate that the growth rate of the parallel model exhibits irregular fluctuations,whereas the vertical model aligns more closely with reality.Finally,this paper suggests that the government should enhance regulation of monopolistic practices by companies that abuse patents,and strengthen patent protection for small and medium-sized companies.This would ensure a fair dis-tribution of profits between upstream and downstream sectors,thereby promoting innovation in the industrial chain and economic growth.
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