Intellectual Property Rights, Multinational Firms and Technology Transfers (original) (raw)
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Intellectual Property Rights, Imitation, and Foreign Direct Investment: Theory and Evidence
2007
This paper theoretically and empirically analyzes the effect of strengthening intellectual property rights in developing countries on the level and composition of industrial development. We develop a North-South product cycle model in which Northern innovation, Southern imitation, and FDI are all endogenous. Our model predicts that IPR reform in the South leads to increased FDI in the North, as Northern firms shift production to Southern affiliates. This FDI accelerates Southern industrial development. The South's share of global manufacturing and the pace at which production of recently invented goods shifts to the South both increase. Additionally, the model also predicts that as production shifts to the South, Northern resources will be reallocated to R&D, driving an increase in the global rate of innovation. We test the model's predictions by analyzing responses of U.S.-based multinationals and domestic industrial production to IPR reforms in the 1980s and 1990s. First, we find that MNCs expand the scale of their activities in reforming countries after IPR reform. MNCs that make extensive use of intellectual property disproportionately increase their use of inputs. There is an overall expansion of industrial activity after IPR reform, and highly disaggregated trade data indicate an increase in the number of initial export episodes in response to reform. These results suggest that the expansion of multinational activity more than offsets any decline in the imitative activity of indigenous firms.
We build a theoretical model in which MNFs based in developed countries (the North) offshore production of an intermediate good in a developing country (the South). MNFs can open a subsidiary in the country (vertical integration), or rely on independent contractors (outsourcing), through a licensing contract based on a Northern blueprint. The environment in the destination country is characterized by incomplete contracts and an imitation risk related to weak IPR enforcement. Our model shows that under reasonable assumptions on model parameters, a reinforcement of IPR in the South increases the relative share of imports from vertically integrated suppliers (and decrease the share of outsourcing to independent suppliers). The model predictions are tested using data on intra-firm trade of US multinationals provided by the U.S. Related-Party Trade database. JEL classification: F23, F12.
World Economy, forthcoming
Using bilateral trade data of countries from 2000 to 2007, this paper contributes to the empirical literature on the role of intellectual property rights (IPRs) in global trade. The existing literature has focused on how IPRs in the destination country affect exports from a source country. In this paper, we add an additional dimension: the level of technology of the exporting country (LT). This is quite important for distinguishing the impact of IPRs on the exports of developed and developing countries, since the technology levels vary across countries at different stages of development and intellectual property rights better protect exports that are technologically advanced than exports that are imitative and potentially infringing. By factoring in the level of technology (LT), our empirical analysis makes the case that IPRs can act as barrier to exports from the South, especially the rapidly catching-up economies, and thus as one source for the middle-income trap phenomenon.
International Sourcing, Product Complexity and Intellectual Property Rights
SSRN Electronic Journal, 2000
In this paper, we propose the technological complexity of a product and the level of Intellectual Property Rights (IPRs) protection to be the co-determinants of the mode through which multinational firms purchase their goods. We study the choice between intrafirm trade and outsourcing given heterogeneity at the product-(complexity), firm-(productivity) and country-(IPRs) level. Our findings suggest that the above three dimensions of heterogeneity are crucial for complex goods, where firms face a trade-off between higher marginal costs in the case of trade with an affiliate and higher imitation risks i n t h e c a s e o f s o u r c i n g f r o m a n i n d e p e n d ent supplier. We test these predictions by combining data from a French firm-level survey on the mode choice for each transaction with a newly developed complexity measure at the product-level. Our fractional logit estimations confirm the proposition that although firms are generally reluctant to source highly complex goods from outside the firm's boundaries, they do so when a strong IPR regime in the host country guarantees the protection of their technology.
Foreign IPR, Trade and Innovation: Does complexity matter?
This paper studies the relation between foreign intellectual property rights affect exporting firms' productivity when industries have different technological complexity. Using simple functional forms, the dynamic model derives endogenous steady state distributions of exporting firms' productivity. Numerical simulations show a non-monotonic effect of complexity on productivity, and a positive effect of IPR. Empirical evidence using labor productivity measures support the findings of the theoretical model.
Trade, Imitative Ability and Intellectual Property Rights
Social Science Research Network, 2006
Economic theory suggests some ambiguity concerning the effects of strengthening intellectual property rights (IPRs) on international trade. Here we extend the empirical literature that attempts to resolve this ambiguity. We use panel data to estimate a gravity equation for manufacturing exports, in aggregate and by industry, from five advanced countries to 69 developed and developing countries over the period 1970-1999. In particular, we use threshold regression techniques to determine whether the impact of IPR protection on trade depends upon the level of development, imitative ability and market size of the importing country. We confirm the importance of the importers' imitative ability, and also find some evidence of a role for market size in this relationship. The individual industries present different patterns of thresholds and coefficients, with Total Manufacturing closely reflecting that of Fabricated Metal Products.
Intellectual Property Rights, Foreign Direct Investment and Industrial Development*
The Economic Journal, 2011
This paper develops a North-South product model in which Southern imitation and the North-South flow of foreign direct investment (FDI) are endogenously determined. In the model, a strengthening of IPR protection in the South reduces the rate of imitation, which, in turn, increases the flow of FDI. The increase in FDI more than offsets the decline in production undertaken by Southern imitators, so that the South's share of goods produced by the global economy increases. Furthermore, real wages of Southern workers increase even though prices of goods produced by multinationals exceed those of Southern imitators. The preceding results hold when Northern innovation is endogenously determined; in addition, the rate of innovation increases with a strengthening of Southern IPR protection.
Intellectual property rights protection and trade: An empirical analysis
World Development, 2023
The paper proposes an empirical analysis of the determinants of the adoption of Intellectual Property Rights (IPR) and their impact on innovation in manufacturing. The analysis is conducted with panel data covering 112 countries. First we show that IPR protection is U-shaped with respect to a country's market size and inverse-U-shaped with respect to the aggregated market size of its trade partners. Second, reinforcing IPR protection reduces on-the-frontier and inside-the-frontier innovation in developing countries, without necessarily increasing innovation at the global level.
Endogenous Imitation and Intellectual Property
2004
This paper addresses the analysis of the long-term impact of extending Developed Countries's IP rights standards to Developing Countries. To do this, an open economy ladder-quality R&D-based endogenous growth model is constructed where two countries-developed North and developing South-, trade in final goods. Southern firms have a comparative advantage in manufacturing while the North is more productive in conducting innovation. This implies that imitation of the northern firm's products will be a profitable activity for the South. Technology transfer from North to South occurs through trade however, to be effective, technological knowledge must be absorbed and adapted to the South's labs. Imitation is a profit-seeking activity with non-trivial production costs. Once a Southern firm succeeds in imitating the state-of the-art technology of a certain product line, production moves to the South and the former incumbent stops producing that good. The model generates a steady-state growth path where the pace of technological progress is driven only by innovation, and where strengthening IP rights has positive effects on the Southern country, but turns out to have mixed results for both innovation and human capital accumulation in the North.
2005
It is remarkable that the transaction of technology takes a significant part of international trade. This is caused by an increase in the international transfer of technology evolved through foreign direct investment (FDI) and the international fragmentation of production process, in addition to a changing structure of trade in goods to trade in software. It is also notable that a number of developing countries have been strengthening the enforcement of intellectual property rights (IPRS) in their countries in these years. Such an enforcement of IPRS causes a question how it affects the international transfer of technology. Although this issue is one of important research subjects of law and international economics, few empirical analyses have been undertaken thus far. There are some reasons for this. The first is the limited availability of data. Few countries disclose firm-level data on the international transfer of technology. The United States exceptionally performs detailed sur...