Yes, although our most important insights stem from a combined use of qualitative and quantitative methodologies. On the quantitative side, a long line of studies in the economics literature on innovation have estimated patenting behavior at the firm and industry level using so-called "patent production functions". (One of us, Bronwyn Hall, is a major contributor to this body of literature). Our interviews with industry representatives were not only critical in helping us interpret our econometric results, but also enabled us to identify new variables that turned out to be important determinants of patenting in this sector that were not examined in previous studies.

The research was initiated in 1998, when we were both actively participating in what became known as the "innovation seminar" at the University of California, Berkeley. (Bronwyn Hall is a professor in the economics department at UC Berkeley, and Rosemarie Ziedonis was a doctoral student at Berkeley’s Haas School of Business at the time). We were intrigued by what appeared to be a surprising empirical trend: the patenting of semiconductor inventions in the United States had risen dramatically since the mid-1980s (in absolute terms and relative to R&D spending); at the same time, surveys of R&D lab managers suggested that patents were quite ineffective at enabling firms to protect R&D investments in sectors such as semiconductors—where product life cycles are short and technology changes rapidly. If semiconductor firms do not rely heavily on patents to profit from innovation, then why are they patenting so aggressively? Is the upsurge in patenting in this sector causally related to changes in the US patent system during the 1980s? We designed a study to investigate these questions, and our study was selected for funding by the Sloan Foundation Project at the National Bureau of Economic Research as part of a larger body of work on "The Patent System and Innovation".

During the 1980s, changes in the U.S. legal environment ushered in an era characterized by strong patent rights. We examine the effects of this so-called "pro-patent" shift on firms in the semiconductor industry by (1) conducting interviews with industry representatives and (2) analyzing the patenting behavior of roughly 100 US semiconductor firms over a twenty-year period. Although we find little evidence that the legal reforms boosted overall R&D spending in this sector (as traditional economic theory would predict), our results suggest that the shift towards stronger patent rights did facilitate entry by specialized firms in this sector. Our second main result is more controversial from a policy perspective and, perhaps accordingly, has received the most widespread attention: we also find that the "pro-patent" shift induced capital-intensive firms to "ramp up" their portfolios of patents more aggressively—largely to deter threats of litigation and to improve their bargaining positions in negotiations with other patent owners. On the one hand, these results highlight the broader, strategic value of patents and help explain why firms may patent aggressively even if they do not rely heavily on patents to profit from innovation. On the other hand, they call into question whether the US patent system is unintentionally generating a tax on innovation in important technological sectors.

Rosemarie Ham Ziedonis
University of Michigan Business School
701 Tappan Street, Room D-4208
Ann Arbor, MI 48109-1234