Why Governments Grow “Lemons” in the Market for Technology: Evidence from India’s Public R&D Push

• In Event: Innovation Under Pressure: Policies, Shocks, and Spillovers

Abstract

In low-accountability environments, government incentives designed to boost innovation may inadvertently encourage the proliferation of “lemon patents”—patents with limited novelty, minimal citations, and little market relevance. This study investigates the effects of India’s expanding public research investments on the quality of technological output, focusing on national R&D initiatives launched after 2005, including the Nano Mission and the strengthening of CSIR-led patenting activity.

Leveraging a difference-in-differences identification strategy, I compare patent performance in government-prioritized sectors (e.g., nanotechnology, biotechnology) to those in adjacent, less-funded domains. Using citation counts and commercialization data as proxies for quality, preliminary results suggest that although patent volume in treated sectors rose by approximately 35%, the likelihood of a patent receiving at least one citation within five years declined by 4–6 percentage points, with a 1 percentage point drop in the share of highly cited (10+) patents. These results are consistent across classification-based and keyword-based definitions of targeted technologies.

To address concerns of time-varying field effects, I employ a triple-differences framework using Malaysian patent trends as a benchmark. Additionally, I find a 12% decline in licensing rates for patents filed by Indian public institutions in treated sectors post-policy implementation, signaling a weakening link between patent generation and technological transfer.

This research highlights the unintended consequences of R&D performance metrics based on quantity rather than quality. It underscores the need for institutional reforms in grant allocation and evaluation processes to align innovation incentives with meaningful technological advancement.

Author

• Sonali Singh, University of Texas, Dallas
  Presenting Author