What do firms gain from patenting? The case of the global ICT industry

This study investigates the causal relationship between patent grants and firms’ dynamics in the global Information and Communication Technology (ICT) industry, as the latter is a peculiar sector of modern economies, often under the lens of antitrust authorities. We exploit matched financial accounts and patent grants in 2009–2017 by 179,660 companies in 39 countries. Preliminarily, we find that less than 2% of larger firms are responsible for 89% of the grants. We propose a quasi-experimental strategy that first controls for reverse causality and then separates the impact of IPR protection from the innovative content of inventions making use of exogenous variation at the patent offices. We find that patents have a considerable impact on market shares and the size of smaller companies (31.7% and 30.7%, respectively) in the first year after the grants, which is mainly due to IPR protection. Most of the bigger firms’ gains fade away after controlling for reverse causality and endogeneity. Notably, we never observe a direct impact on profitability for any firm size category. Eventually, we argue that IPR reform proposals should consider firms’ heterogeneity and improve IPR access for smaller companies to enhance competition. • IPRs in the global ICT industry are highly concentrated among bigger firms. • We propose a quasi-experimental design to catch the impact of IPR on firms’ outcomes. • Smaller firms benefit the most from patents. • Larger firms record lower direct gains not robust to checks for endogenous innovation. • We argue that IPR reforms better consider firms’ heterogeneity and favor smaller firms.