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The study aims to estimate the impact of R&D expenditure and patenting on the performance of firms using productivity, profitability and Tobin's q ratio as the performance indicators. The study uses firm-level data of 489 high-and medium-technology firms during the period of 2000-2010. We employ relatively a new source of data particularly in the context of India, firm-level patent granted, that has not been explored earlier. The study finds that firms patenting result in productivity improvement of firms, whereas R&D expenditure does not. The study further finds the evidence of positive impact of patenting on financial performance of firm with significant differences between foreign and domestic firms.

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Emerging economies realizing the importance of innovation are taking steps to enhance their innovative capabilities. Among the tools used, institutional factor such as patent protection policy is being increasingly used by such economies, despite mixed research evidence linking patent protection policies and innovation. This study investigates the effects of patent policy changes on stimulating innovation in India. Panel data regression technique is used on data for 1989–1990 to 2009–2010. The results indicate that patent policy changes, specifically, increase in the protection duration, enforcement mechanism, and membership into international convention dimensions of patent policy have positive influence on the R&D intensity.

Firms in the developing countries transfer technology predominantly produced in the developed economies through different modes namely market-mediated channels including trade in goods and services, foreign direct investment, licensing or non-market channels like employees turnover. Multitude of host country’s factors (locational and policy related) influences the mode-choice decision of multinational enterprises among exports, FDI and licensing to work in a host country. Among these factors, provision for the protection of patent rights reduces transactions costs that lead to externalization in form of arm’s-length licensing against FDI. India has made patent policy changes during the post globalization period to comply with Trade Related Intellectual Property Rights Agreement. Accordingly, this study attempts to find the influence of the patent policy changes on licensing strategy of the Indian manufacturing industry. This paper is based on panel data of 51 industries for period 1989-90 to 2009-10. We have checked each panel data regression for the presence of heteroscedasticity, contemporaneous correlation and serial correlation. In case of the presence of heteroscedasticity and contemporaneous correlation the results are based on heteroskedastic panels corrected standard errors and correlated panels corrected standard errors. As the modeling is based on macro-panel data having large number of industries (N) and time period (T) each data series is checked for unit-root using panel data unit-root tests. The study uses Fisher type test. We estimate the model after controlling for the general policy changes in India following the liberalization, privatization and globalization of the economy. We are able to establish a substitutable relationship between licensing from international market and in-house R&D. The removal of licensing regulations of different industries has a positive influence on the firm’s decision to license. We also find a complementary relationship between capital goods import and licensing. Thus, policy makers should allow for easy capital imports to facilitate technology transfers. The study indicates that patent policy influences technology transfer to India albeit negatively and limited to patent-sensitive industries confirming the monopoly power effect for such industries. Thus, policy makers have to use regulatory approach to facilitate transfers instead of merely relying on the market approach. Moreover, with respect to patent-sensitive industries there is need to closely watch the licensing behavior of the technology owners for anti-competitive practices.