Patent breadth as effective barrier to market entry

Firms protecting their invention by a patent have the legal right to exclude competitors from using the patented matter. However, despite patent protection, competitors could enter the market by ‘inventing around’. Provided that inventing around becomes more difficult the broader a patent is, the strength of protection against market entry increases in patent breadth. Building on a theoretical benchmark formalizing the relationship between varying patent breadth and the threat of market entry, our empirical analysis supports the prediction that inventors perceive broad patents as effective market entry barriers.