Causal links between patents and economic growth: empirical evidence from OECD countries

Öznur Özkan Yıldız; Selda Görkey

doi:10.5585/2024.26107

Authors

Öznur Özkan Yıldız Işık University https://orcid.org/0009-0008-3243-3579
Selda Görkey Işık University https://orcid.org/0000-0002-2760-3667

DOI:

https://doi.org/10.5585/2024.26107

Keywords:

patent applications, patent grants, economic growth, panel VAR, panel VAR-granger causality

Abstract

Objective of the Study: This paper empirically investigates the reciprocal relationship and causality between patents and economic growth.

Methodology/Approach: Utilizing the Generalized Method of Moments (GMM) Panel Vector Autoregression (PVAR) and panel VAR-Granger Causality frameworks, the study concentrates on Organisation for Economic Co-operation and Development (OECD) economies where a high fraction of global innovative activities take place.

Originality/Relevance: The relationship and causality between patents and economic growth are investigated and evaluated by distinguishing the former variable into patent applications and grants.

Main Results: The findings from the GMM panel VAR approach indicate that patent applications and grants significantly affect economic growth, whereas economic activities do not influence patent-related variables. The estimations from the panel VAR-Granger approach confirm these findings by presenting a unidirectional causality from patent applications and grants to economic growth. The impulse-response functions (IRFs) exhibit parallel findings, and further checks validate the stability of the findings obtained. The outcomes of this study point out two crucial implications. First, the impacts of patent applications and grants affect economic growth similarly while the impact of patent grants lasts longer. Second, while patents cause higher economic activity, the latter does not induce innovative activity through patents in the OECD.

Theoretical/Methodological Contributions: It would be useful to conduct separate analyses for a selected product, sector, or country by including research and development (R&D) expenditures for different periods, country groups, and analysis methods.

Social/Management Contributions: Countries should prioritize the establishment of an effective patent management system that will increase the pace of innovation and the implementation of incentive policies for the development of high-value-added technology products.

JEL Classifications: O34, O40, O50, C23

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Author Biographies

Öznur Özkan Yıldız, Işık University

Öznur Özkan Yıldız completed her postgraduate education at Işık University, Department of Applied Economics. Her research areas concentrate on economic growth, innovation, research and development, and patents. She has held positions in finance in different companies and sectors. She provides freelance consulting to companies in innovation-based process improvement and executive coaching. Department of Economics, Işık University. İstanbul – Turkey

Selda Görkey, Işık University

Selda Görkey is an Associate Professor of Economics at Isik University, Istanbul, Turkey. Her research areas concentrate on economic growth and development, economics of technological change, and labor markets. She has authored many publications, including international journal articles, book chapters, and conference proceedings. Assoc. Prof. Department of Economics, Işık University / İstanbul – Turkey

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