From Mike Masnick at Techdirt (from 2007):

New Study Shows Patents And Innovation Are Not Related

from the no-clear-connection dept

There’s an annoying trend among many to assume that patents are a proxy for innovation. In fact, this leads to the false assertion that more patents or more patent applications somehow means more innovation. However, as we’ve obviously seen, the reverse can often be true. We’ve shown plenty of examples where patents have been used to hold back innovation rather than encourage it. It’s nice to see that there’s some more data supporting this as well. John Bennett atAgainst Monopoly points us to a new paper from Booz Allen Hamilton, looking at 1000 companies that do serious research and development, where they found no link between patents and innovation. Patents, they note, show no statistical relationship to profits. They point out that few patents actually have any real impact on innovation, and often the most innovative things have no patents at all. Another interesting finding in the study is that big companies aren’t very good at leveraging their scale to innovate. This is an issue that comes up often when we discuss patents. People make the claim that small companies can’t out-innovate large companies because those large companies have all the money. However, the study suggests that’s not true at all. Larger companies can be woefully bureaucratic, slow, inefficient and risk averse. That leaves plenty of opportunity for smaller companies to out innovate the larger ones despite the appearance of a disadvantage in money and scale.

See also Pierre Desrochers, On the Abuse of Patents as Economic Indicators, Quarterly Journal of Austrian Economics (Winter 1998).