How Vital is the Existence of IP in Encouraging Innovation ?!

In my previous posts I have talked about environment, tools and government policies necessary to foster entrepreneurship and innovation in a country. At the same time, I discussed how entrepreneurial activities and innovations lead to economic development of a country. Therefore, I want to continue discussing the topic by introducing the subject of intellectual property laws. From my point of view, existence of intellectual property (IP) laws in a country plays a great role in encouraging creativity and innovation. And to clarify how it does, let’s start to define intellectual property. According to Barringer and Ireland (2006), ‘intellectual property is any product of human intellect that is intangible but has value in the marketplace.’ It is called “intellectual” property because it is the product of human imagination, creativity and inventiveness (Barringer & Ireland, 2006). And mostly it is the result of hard work and risky behavior considering the time and money spent on it. Now, imagine that a company or a person owns some kind of intellectual property which is there and others can simply copy. How will it influence the future behavior of that firm or that person? Will the firm of the person be willing to spent time and money on the product which is easily copied by competitors and does not help to gain competitive advantage? Logical answer is most probably not. That’s why intellectual property rights were introduced and granted under the intellectual property laws. Barringer and Ireland (2006) propose that ‘intellectual property laws exist to encourage creativity and innovation by granting individuals who risk their time and money in creative endeavors exclusive rights to the fruits of their labors for a period of time.’ It is obvious that entrepreneurs are more motivated to create something new, invent and innovate more to gain first-mover advantage or competitive advantage when they are granted exclusive rights on their intellectual property. Besides, taking into consideration that innovations and entrepreneurial activities lead to economic development, the importance of intellectual property laws becomes critical. Another positive aspect of intellectual property laws is that it assists individuals make well-informed choices. Whenever a consumer sees the H&M shop, he/she knows what to expect from the shop since only H&M is permitted to use the trademark for cloth, shoes, jewelry and etc. Most importantly, intellectual property can be source of income through such ways as licensing. Licensing incomes further motivate companies to be more creative and innovative since large portion of income generated is from granting others rights to use their intellectual property for some fee. Finally, I want to mention one caution involved in intellectual property protection that it is up to the entrepreneur to take advantage of them and to safeguard his or her intellectual property once it is legally protected (Barringer & Ireland, 2006). No one is going to protect your intellectual property if you as an entrepreneur do not take care of it. That's why it is suggested that companies do intellectual property audit to monitor if their intellectual property is adequately protected. To sum up, existence of intellectual property laws becomes critical factor or element in creating innovative environment in a country, which then leads to its economic development.


References:
Barringer, B. R. & Ireland, R. D. (2006). Entrepreneurship: successfully launching new ventures (pp. 278-300). Upper Saddle River, NJ: Pearson Education.