The Creative Cost of Piracy

http://www.innovationfiles.org/the-creative-cost-of-piracy/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed:+InnovationFiles+%28Innovation+Files%29

By Adams Nager · October 3, 2014

Proponents of effective intellectual property (IP) rights have long argued that weak IP protections will lead to less intellectual property creation. The logic appears clear: if content creators and other innovators know that a significant share of their work will not be pirated or otherwise stolen they will have both less incentive and less revenue to create new ideas, creative goods, and innovations. [The "not" is obvious typo.]

•••••

Put simply, countries that score higher on IP protection also score higher on creative outputs relative to the size of their economy. Over a sample of 136 countries there is a strong positive correlation of 0.72 between the strength of IP protections and score on creative outputs.

•••••

However, for both “intangible assets” and “creative goods and services” the correlation with IP protections is stronger than the correlation with GDP per capita.

•••••

The result was strongest with high income nations, with a correlation of 0.57, but also fairly strong in middle income nations, with a correlation of 0.47.

•••••

In low income countries, the correlations between IP protections and all measures of creative output were weaker but still positive. There is a correlation of 0.22 between creative outputs and IP protections.

•••••

Of course, correlation does not imply causation, and simply enacting strict IP protections will not automatically generate creative output growth. But there are several theoretical reasons why countries that focus on smart IP protections (e.g., a regime that limits piracy but provides reasonable safe harbors for intermediaries) would see creative outputs generated at a greater rate than a similar country which is content to enact and enforce weak IP protections.

In the short run, a country will have to pay more to access foreign inventions and ideas (compared to IP theft). However, in the long run, by ensuring that domestic innovators have clearly defined rights to what they produce, innovators have greater incentives to innovate. In leading countries, a culture of creation spills over from business to other parts of the society, leading to a more creative, more engaged populous. Protecting inventions through patents has a similar effect.

Countries may think that by side-stepping foreign IP laws they are gaining an advantage. However, such policies have deleterious consequences. Weak IP may also discourage foreign direct investment by multinationals who want their innovations protected. Indeed, leading empirical research in the field shows that weaker IP rights are associated with lower volumes of FDI and exports among developing nations.

•••••