Lanjouw and Schankerman (2004) proposed that patent quality is a key driver of R&D
productivity but did not find supportive evidence for pharmaceuticals. This study revisits
this hypothesis using OECD data for the period 1980-2000. It extends the literature in
three ways: it develops new R&D price deflators to account for R&D price inflation; it
employs two complementary indicators of patent quality, and applies dynamic panel data
estimation techniques. When corrections are made for cross-sectional dependence, two
major findings emerge: international inventor collaboration is an important indicator of
patent quality, and there is strong support for the maintained hypothesis.