How Do Patents Affect Research Investments?

Although patent systems have been widely used both historically and internationally, there is nonetheless a tremendous amount of controversy over whether patent systems, in practice, improve the alignment between private returns and social contributions. In this article, I describe three parameters—how the disclosure function affects research investments, how patent strength affects research investments in new technologies, and how patents on existing technologies affect follow-on innovation—needed to inform the question of how patents affect research investments, and review the available evidence that has attempted to empirically estimate these parameters.