Intellectual Property protection: The key incentive to innovation

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Intellectual property rights , patents in particular , are perhaps most critical in industries characterized by high fixed costs of development and low marginal costs of production.

Intellectual property (IP) protections are fundamentally about encouraging the innovation that drives human progress. And these protections have been extraordinarily successful contributing to rapid increases in global living standards over the past two centuries

The Information Technology and Innovation Foundation (ITIF) took a deeper look at the latest data on the strength of IP laws and the amount of innovative, creative output around the word, and found that overall, countries with stronger IP protection also have more creative output, even at varying levels of development. The results show why countries need to support efforts to ensure international rules address new and emerging IP issues in order to ensure that firms and countries are maximizing their innovative and creative potential.

The key finding is that there is a strong positive correlation (0.74) between the strength of IP protections and countries’ score on creative outputs, based on a sample of 119 countries (only those countries which had all the necessary data). ITIF assessments in 2016 and 2014 produced similar results of 0.70 (from a sample of 127 countries) and 0.72 (from a sample of 136).

Whether a country is trying to catch up to the technology frontier, or push it ahead, stronger intellectual property protections are crucial to incentivizing the creativity and innovation that helps make this happen. Given this, countries—at all levels of development—that want to spur innovation need to support efforts to ensure international norms reflect the modern challenges facing IP protection and enforcement and help set better, shared IP rules in order to ensure that firms and countries are maximizing their innovative and creative potential.

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