What Role for Intellectual Property in Industrial Development?

Wide differences in per capita incomes persist across and within different world regions, and economic research has argued that patterns of technology diffusion go a long way in explaining these differences. Yet, looking back at the past 40 years, it is also the case that a number of East Asian economies were able to achieve remarkable industrial development, and today host companies that compete at the world’s technology frontier. A natural question to ask is what role public policies played in spurring successful industrialization. This question seems especially pertinent in relation to technology, given the many market failures associated with knowledge acquisition and knowledge diffusion. A large number of theories have emerged and empirical investigations carried out in search for an answer. In this chapter, we scrutinize the resulting economic literature to provide a perspective on the role of intellectual property in the industrial development process. We do so in the following way. We first contrast the industrial development experience of East Asia to that of Latin America and summarize the explanations economists have offered to account for them (Sect. 2). We then turn to intellectual property and explore the evolution of both IP policies and IP use in the two regions (Sect. 3), before reviewing and critically assessing the empirical literature that has attempted to establish causality between intellectual property and industrial development (Sect. 4). Against this background, we ponder on how policymakers should approach the development of their IP framework as part of broader industrial policy objectives (Sect. 5).