Analysis of the factors affecting PCT patent applications

Abstract

The purpose of this paper is to understand the mechanism of the patent system by identifying the factors affecting the number of PCT patent applications. The panel data regression in this study has confirmed that the amount of R&D expenditure is the single most critical factor affecting the number of PCT patent applications. The Pooled OLS, Fixed-Effect Panel regression and 2SLS unanimously showed that the coefficient for ‘logged value of R&D expenditure’ is around ‘1’ which implies that the increase in the R&D expenditure leads to the same rate of increase in the number of PCT patent applications. In addition, the residual analysis indicated that even though South Korea is highest in R&D expenditure rate, it is lagging behind the US and Japan. The comparison of the National Innovation System between the US and South Korea suggested that in spite of the institutional and structural similarities, the operational inefficiency in the National Innovation System is responsible for the gap.