Shaping Innovation: Can Industrial Policies Boost Patent Applications?

IMF Working Papers, March 13, 2026

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Canonical URL: Shaping Innovation: Can Industrial Policies Boost Patent Applications?

Authors: Sandra Baquie, Yueling Huang, Florence Jaumotte, Jaden Kim, Rafael Machado Parente, Samuel Pienknagura
Published: March 13, 2026
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9781513542102.001

The paper presents a global empirical analysis of how industrial policies (IPs) affect patent applications using an instrumental-variable strategy that addresses selection in policy targeting by leveraging retaliatory dynamics.
On average, IPs do not increase domestic patent applications over a four-year period.
IPs increase domestic patent applications when they target sectors with potential distortions or externalities, such as infant industries or low-carbon technologies.
IPs temporarily boost foreign patent filings within the same four-year timeframe, consistent with strategic front-loading by foreign inventors seeking to secure technology protection, and perhaps market access, in the IP-targeted sector.
The association between foreign patent applications and IPs is stronger:
- for export-oriented policies compared to domestic subsidies,
- for IPs targeting innovation-central sectors,
- in emerging markets and developing economies.

Uses an instrumental-variable strategy that leverages retaliatory dynamics to address selection in policy targeting.
Focuses on patent applications as the outcome variable over a four-year period.
Conducts a global empirical analysis.

Industrial policies do not uniformly stimulate domestic patenting; targeted IPs matter:
- Policies aimed at sectors with distortions or externalities (infant industries, low-carbon technologies) are associated with domestic patent increases.
Export-oriented IPs can induce temporary strategic responses by foreign inventors (front-loading of patent filings), suggesting IPs have cross-border effects on innovation activity and intellectual property strategy.
The heterogeneous effects across policy type, sectoral innovation centrality, and country income group (notably emerging markets and developing economies) imply that the design and target of IPs shape their innovation outcomes.

Subject: Econometric analysis, Estimation techniques, Export subsidies, Exports, International trade, Trade policy
Keywords: Asia and Pacific, c robustness, East Asia, Estimation techniques, Europe, Export subsidies, Exports, Global, IMF working papers, income group, Industrial Policies, Innovation, ip-targeted sector, Low-carbon technology, Networks, Patents, Trade policy, views of the IMF