Design Rights, Profitability and Performance in Swedish Firms

Generation of designs allow firms to gain more competitive advantages and attract more potential customers over their competitors. This is a reason why design protection is important. Design protection plays an important role in preventing the authorised use of a firm’s designs by their competitors and the number of applications for design rights each year are high. Apart from a solution to the appropriation problem that design protection provides, firms may have other motivations for seeking its use. This study aims to understand financial motivations of having designs protected, and as such examines the relationship between design rights, profitability and performance of Swedish firms. Pooled OLS regression is applied to analyze the design and financial data from 1,735 Swedish firms from 2003 to 2016. It is shown that European and Swedish national design rights are negatively related to subsequent profitability of Swedish firms. However, for only European design rights, they do show a positive relationship with subsequent performance of Swedish firms.