  This study investigates the causal relationship between patent grants and
firms' dynamics in the Information and Communication Technology (ICT) industry,
as the latter is a peculiar sector of modern economies, often under the lens of
antitrust authorities. For our purpose, we exploit matched information about
financial accounts and patenting activity in 2009-2017 by 179,660 companies
operating in 39 countries. Preliminarily, we show how bigger companies are less
than 2% of the sample, although they concentrate about 89% of the grants
obtained in the period of analyses. Thus, we test that patent grants in the ICT
industry have a significant and large impact on market shares and firm size of
smaller companies (31.5% and 30.7%, respectively) in the first year after the
grants, while we have no evidence of an impact for bigger companies. After a
novel instrumental variable strategy that exploits information at the level of
patent offices, we confirm that most of the effects on smaller companies are
due to the protection of property rights and not to the innovative content of
inventions. Finally, we never observe a significant impact on either
profitability or productivity for any firm size category. Eventually, we
discuss how our findings support the idea that the ICT industry is a case of
endogenous R&D sunk costs, which prevent profit margins from rising in the
presence of a relatively high market concentration.
