Impact of Stronger Intellectual Property Rights Regime on Innovation: Evidence from De Alio Versus De Novo Indian Bio-Pharmaceutical Firms

We examine the impact of a stronger intellectual property rights (IPR) regime through the adoption of TradeRelated Aspects of Intellectual Property Rights (TRIPS) on innovation by Indian firms in the biopharmaceutical industry. We find that differences in the IPR regime at the time a firm was founded led to subsequent differences in firms' propensity to innovate and their nature of innovations. Building on institutional change theory, we argue that firms created under the pre-TRIPS regime, which we refer to as de alio firms, have a lower propensity to innovate and have a focus on process innovations. De novo firms, which are firms created under TRIPS, have a greater propensity to innovate and have a focus on product innovations. Further, we study how international technology alliances have helped Indian bio-pharmaceutical firms to overcome their limitations arising due to institutional imprints and to improve their innovation capabilities. Data on 164 Indian biopharmaceutical firms from 1995 to 2018 is used to empirically test our hypotheses.