Fact of the Week: International Research Cooperation via Co-patenting Yields Greater Innovations Than Co-patenting Between Domestic Firms

Source: Iino, et al., “How Does the Global Network of Research Collaboration Affect the Quality of Innovation?” The Japanese Economic Review, June 2021.

Commentary: As economic growth becomes increasingly shaped by access to knowledge and information, firms within developing economies benefit greatly from research collaboration through international partnerships. Research networks become more valuable as they grow more widespread. Firms with sparse or highly concentrated research networks rely on more localized chains of information to produce greater innovations in technology. Concentrated research networks are more likely to overlap in their information-sharing. Any innovations produced by collaboration among domestic firms are also constrained by fixed effects within a country’s access to technology, data, and human capital of labor supply. International research networks, however, overlap far less in information-sharing and can benefit from any comparative advantage over research inputs between countries.

New research by a team of four economists examined firm-level data between countries to quantify the effects of research network sizes with respect to innovations. The study examined over a half-million firms between the United States, Germany, France, China, Japan, and South Korea and used the number of patents a firm co-owned internationally as an indicator of international research collaboration. Quality of innovation was approximated as the number of citations for intellectual property controlled by a given firm. Econometric modeling found that, in all six of the countries included in the study, there was a positive and highly significant relationship between the number of international patents a firm co-owned and the frequency with which their IP was cited. This suggests international research cooperation greatly improves the quality of innovations across countries.

Two countries in particular, China and South Korea, stand to gain the most from international research cooperation. Logistic modeling found that Chinese firms engaged in international co-patenting were associated with having 87 percent more IP citations than Chinese firms not engaged in any international co-patenting. Similarly, South Korean firms engaged in international co-patenting were associated with having 36 percent more IP citations than South Korean firms without any co-ownership of international patents.

Latecomers to the global research industry, such as China, have especially high improvements in innovation quality from global collaboration, because well-developed research economies have the most valuable innovations to share. The marginal value of international research collaboration diminishes as a country’s research sector grows more developed and its innovations catch up to collaborating countries. Despite this, global research networks are still conducive to greater innovations across countries with cutting-edge and developing research sectors alike.