Legal and institutional features of the Japanese patent system and impacts on productivity growth and entry modes

The Japanese patent system has been characterized as a mechanism of diffusion, as it encourages numerous filings of narrow claims that build incrementally on fundamental technologies developed by domestic and foreign inventors, and advocates cross licensing. However, the effectiveness of the Japanese system in achieving this purpose has not been studied systematically.;Chapter Two analyzes legal features of the post-war Japanese patent system (JPS) and investigates empirically whether and how they influenced Japan's pattern of technology and productivity growth. Chapter Three advances that analysis by providing an explicit quantitative comparison between Japan and the United States in order to test how distinct differences in institutional features affect diffusion on an aggregate and industry level. The study continues with how such technology diffusion contributed to productivity growth. The empirical findings indicate that the JPS was effective in promoting technological diffusion and that such diffusion had a positive impact on technical progress, on an aggregate level and in the chemical, general machinery, and physics industries. Theory suggests opposing effects from diffusion: quick assimilation of new technologies and decreased incentives for firms to engage in R&D. Hence, these empirical findings are striking and interesting. They may be explained by the fact that Japan was in a "catch-up" phase during this time. That is, Japan was technologically catching-up to advanced, industrialized countries and thus, diffusion-promoting mechanisms had a positive effect on Japan's technical progress.;Chapter Four investigates the role of the Japanese patent system (JPS) in foreign firms' chosen mode of entry. Specifically, this chapter turns to licensing, another mechanism for technology diffusion, and examines whether and how patent practices in Japan affected FDI and licensing decisions by U.S. firms into Japan's market. This chapter offers a simple model to demonstrate how inventing around affects FDI and licensing decisions, then provides empirical evidence that features of the JPS promoted licensing over direct investment as an entry mode for U.S. multinational firms.