Do cross-border joint patents benefit from income heterogeneity? Evidence from 77 countries

To capture new growth opportunities, firms from developed economies are increasingly engaged in cross-border R&D collaboration and jointly obtain a growing number of patents with partners from emerging and developing economies. However, surprisingly little is known about how the quality of cross-border joint patents varies when developed economy firms collaborate with partners from countries with varying income levels, a key indicator of market demand conditions. Drawing on two bodies of literature, the Linder-Porter hypothesis and the concept of frugal and reverse innovation, we identify two empirically distinct regimes of cross-border joint patent outcomes, consistent with different innovation orientations adopted in response to income-level asymmetries between collaborators’ countries. Analyzing data from 77 countries over 25 years, we find: (1) for cross-border joint patents co-owned exclusively by assignees in high-income countries, their quality, measured by the number of forward citations, declines with a growing difference in per capita income levels between the assignees’ countries; and (2) for cross-border joint patents co-owned by assignees in both high-income countries and the rest of the world, their quality improves as the per capita income difference increases. By establishing boundary conditions under which income dissimilarity enhances rather than diminishes joint patent quality, we refine demand-based theories of innovation and extend the literature on international knowledge transfer.