In 1994, India signed the TRIPs Agreement, which obligated the country to dramatically
strengthen its protection and enforcement of intellectual property rights (IPR).
This paper uses panel data on Indian firms from 1989 to 2005 to ascertain whether the
IPR reforms were successful in increasing innovation by firms in India. We characterize
industries according to their technological dependence on innovation, and find strong
evidence that Indian firms in more innovation-intensive industries increased their R&D
expenditure after TRIPs. The estimated within-firm increase in annual R&D spending
after TRIPs is on average 20 percentage points higher in an industry with a one standard
deviation higher value of innovation intensity. This differential growth estimate is
robust to accounting for contemporaneous trade and industrial policies, and growth in
R&D spending by foreign-owned firms. We also find that patenting by India in the U.S.
increased after TRIPs, and to a greater extent in more innovation intensive industries.