Intellectual property rights, strategy and policy

This introductory essay to the special edition explores the changing role of intellectual property rights (IPRs), and the implications of these changes for firm strategy and industrial policy. Four recent, interrelated trends are important in this regard: (1) the growing prominence of intangible assets as sources of competitive advantage, (2) the globalization of business activities, (3) advances in digital technologies of replicability and transferability, and (4) changes in the legal framework governing the strength and scope of IPRs. We focus, in particular, on the impact of these trends on the importance and effectiveness of patents. We argue that while patents have become more valuable to firms, to fulfill a variety of strategic goals, they seem to have become less effective in actually motivating R&D. This distorts the ‘bargain’ implied by the patent system, increasing the social costs of patenting while decreasing the social benefits. To help restore this balance, various reforms may be implemented, including the use of alternative incentive systems.