Max-Planck-Institut für Innovation und Wettbewerb, München, Raum 313
Innovation is a driver of many widely desired market outcomes, including higher quality, lower costs, more choices, greater efficiency and economic growth. Meanwhile, competition law is supposed to safeguard and foster competition in those markets. It therefore should play an important role in shaping incentives to innovate. Analyses of the effect of competition law on innovation, however, are scarce and suffer from two limitations. Theoretically, existing work—mostly in the law-and-economics tradition—tends to ignore the political and policy context of competition law. Empirically, existing analyses are almost all based on U.S. data—and they yield mixed results. This paper examines the relationship between competition law and innovation (as measured by patent filings) in its political context, and it does so in cross-sectional and panel analyses for a large number of jurisdictions. We find that competition law indeed has a strongly statistically significant and positive effect on the rate of innovation cross-nationally and over time—but only in the context high levels of state capacity and judicial independence.
Ansprechpartner: Felix Poege