MIT Sloan study shows the power of patents to impact innovation

Winners of patent races conduct 14% more follow-on research

CAMBRIDGE, Mass., June 29, 2020 – While the U.S. patent system is designed to protect innovation, it is unclear how many firms are racing for patent protection and what effect racing has on innovation. To gain insights on these questions, Dr. Neil Thompson, an innovation scholar at the MIT Sloan School of Management, created a way to identify patent races and analyze the effect of patent racing on innovation.

“Patent races have often been discussed in theory, but this is the first study to allow a broad-based look at how these are happening in the real world,” says Thompson, who conducted the study with Jeffrey Kuhn of UC Berkeley.

Their research focused on two questions: 1) Where are firms racing to complete similar innovations? 2) What are the benefits of winning that race?

“We found that 10% of all patents are in patent races. This is a surprisingly large number of cases where firms are competing neck-and-neck for the same invention,” says Thompson.

They further found that patent racing is more common in certain technology areas than others. Thompson explains, “Computing had the highest share of patents in races, at 16%, followed by communications, which had 13%. At the other extreme, only 5% of biotechnology patents are in a race.”

Their study also highlighted how races effect how participants innovate in the future. “If you win a patent race, that prompts you to do 14% more follow-on research. In contrast, if you lose you are almost three times as likely to abandon your invention or, if not, you have to try to ‘invent around’ the winner’s patent, perhaps by trying to find another technical way to achieve the same function,” he notes.

“Not surprisingly given the large impact on innovation, firms in patent races spend more on research and development and do a lot more patenting” says Thompson.

He adds, “This study shows that this type of intense competition in innovation is quite common and has big effects on which innovation projects prosper and which fade.”

Thompson is coauthor of “Does winning a patent race lead to more follow-on innovation?”

The MIT Sloan School of Management

The MIT Sloan School of Management is where smart, independent leaders come together to solve problems, create new organizations, and improve the world. Learn more at mitsloan.mit.edu.