Intellectual Property Regimes and Firm Structure

Sourav Bhattacharya, Pavel Chakraborty and Chirantan Chatterjee

No 240829812, Working Papers from Lancaster University Management School, Economics Department

Abstract: We use The Patents (Amendment) Act, 2002 in India as a quasi-natural experiment to identify the causal e¤ect of higher incentives for innovation on firm organizational features. We find that stronger intellectual property (IP) protection has a sharper impact on technologically advanced firms, i.e., firms that were a-priori above the industry median in terms of technology adoption. While there is an overall increase in managers' share of compensation, this increase is about 1.6-1.7% more for high-tech firms. This difference can be attributed to a larger increase in performance pay for high-tech firms. The reform also leads to a significant increase in number of managerial layers and number of divisions for high-tech firms relative to low-tech firms, but only the latter effect is correlated with the differential change in managerial compensation. Broadly, we demonstrate that stronger IP protection leads to an increase in both within-firm and between-firm wage inequality, with more robust evidence for between-firm inequality.

Keywords: Intellectual Property Regimes; High-tech and Low-tech firms; Managerial Com- pensation; Span of Control (search for similar items in EconPapers)
JEL-codes: D21 D23 L23 O34 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-bec, nep-com, nep-ino, nep-ipr, nep-knm, nep-sbm and nep-tid
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