How IPR can shape knowledge diffusion processes

Abstract

Using recent data drawn from the European Working Conditions Survey for 32 European countries, we explore the relationship between two indicators of knowledge diffusion processes —country-level R&D and individual-level ICT usage at work by entrepreneurs—, Intellectual Property Rights (IPR), and individual-level entrepreneurial performance as measured by earnings. Our results show that country-level expenditures on R&D, entrepreneurs’ ICT use frequency at work, and IPR are all positively associated with earnings (and hence the quality) of individual entrepreneurs. However, we also find two intriguing moderation effects in the sense that IPR reduces both the positive relationship between country R&D and entrepreneurial earnings and the positive relationship between ICT usage and earnings. This suggests that too strict IPR legislation may hamper the diffusion of knowledge created by R&D, as well as limit the facilitating role of ICT usage in the exploitation of knowledge spillovers. Hence, governments need to carefully consider the level of IPR they want to install.