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Why patents don’t equal innovation

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Why patents don’t equal innovation

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There are certain myths surrounding innovation that need no end of dispelling.  One, that I covered in a recent blog, was that spending on R&D is a good measure of how innovative an organization is.

The Strategy&Innovation 1000 studies highlight just how futile this approach is however.  It shows that there is no link whatsoever between the amount of money you spend on R&D and the innovation that comes out the other end.

Does more patents = more innovation

Another commonly trumpeted myth is that patents are also a good proxy for innovation.  The more patents that are registered, the more innovative a society is.  At least according to the theory.

The reality however is often somewhat different.  A good case in point is provided by the recent report into innovation by the Congressional Budget Office.  It shows that whilst the number of patents has gone up tremendously in the last few decades, productivity has barely budged.

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Research from the University of Buffalo nicely emphasizes this point.  The study suggests that the benefits of giving up patent protection far outweigh the risks of surrendering market share.  Their findings reveal that by opening up their original innovation to further research it helps to stimulate demand for the product, whilst at the same time enabling it to evolve more rapidly.

“This research arose from the notion that a too-tight patent protection actually may hinder technological progress, reflected in sovereign acts taken by firms who give it up,”Gilad Sorek, author of the study explains.

A paper published a few years ago by Josh Lerner highlights this quite starkly.  He analyzed changes in IP law in 60 countries over a 150 year period.  That meant over 300 distinct policy changes.  He found that when patent laws were strengthened, whether in developed or developing countries, the number of patents issued dropped. So when the system was altered to encourage greater innovation, it actually produced less.

Central to this is the old game theory strategy of tit-for-tat.  The way we behave influences how other people behave towards us.  A recent study published in the Academy of Management Journal highlights how a similar affect can be seen when we share ideas on a personal level, within our organizations.  It suggests that there are similar processes at play on an individual level as there are at an organizational level.

“More specifically, employees who intentionally hide more knowledge seem bound to receive such selfish behavior in return from their co-workers, which will ultimately hurt them and decrease their creativity,”the researchers wrote in the study.

So in other words, just as shielding intellectual property behind patents encourages other organizations to do the same, so does shielding knowledge from your colleagues.  The research went on to reveal some of the systemic factors that tend to produce such an environment.  Highly competitive environments for instance not surprisingly do little to promote sharing.

Maybe it’s time that the myth around patents is put to bed for good.

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