Do people in countries without patent law innovate?

Petra Moser in a new paper (December 2012) concludes:

Historical evidence suggests that in countries with patent laws the majority of innovations occur outside of the patent system. Countries without patent laws have produced as many innovations as countries with patent laws during some time periods, and their innovations have been of comparable quality. Even in countries with relatively modern patent laws, such as the mid-19th century United States, most inventors avoided patents and relied on alternative mechanisms when these were feasible. Secrecy emerged as a key mechanism to protect intellectual property; its effectiveness relative to patents varies with the technological characteristics of innovations across industries and over time. In industries where secrecy was effective, inventors were less likely to use patents. Advances in scientific analysis, which lowered the effectiveness of secrecy, increased inventors’ dependency on patents.

The paper is here, and it is a very accessible read.