Intellectual Property Rights, Imitation, and Foreign Direct Investment: Theory and Evidence (original) (raw)
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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.
Does intellectual property rights reform spur industrial development?
Journal of International Economics, 2011
An extensive theoretical literature generates ambiguous predictions concerning the effects of intellectual property right (IPR) reform on industrial development. The impact depends on whether multinational enterprises (MNEs) expand production in reforming countries and the extent of decline in imitative activity. We examine the responses of U.S.-based MNEs and domestic industrial production to a set of intellectual property rights (IPR) reforms in the 1980s and 1990s. Following reform, MNEs expand the scale of their activities. MNEs that make extensive use of intellectual property disproportionately increase their use of inputs. There is an overall expansion of industrial activity after reform, and highly disaggregated trade data indicate higher exports of new goods. These results suggest that the expansion of multinational activity more than offsets any decline in imitative activity.
2013
The study is to develop an extended North-South model to analyze the IPR conflict and possible policy implications for the pharmaceutical industry. In this proposed theoretical and empirical work, innovation from the North, followed by imitation in the South (India and Bangladesh), and Foreign Direct Investment (FDI) all will be treated as endogenous. We feel that whether tighter IPRs benefit the North or South depends crucially on market structure. It seems that in an oligopolistic market induced by vertical innovation, tighter IPRs may hurt both economies; while in a monopolistic competition market induced by horizontal innovation, tighter IPRs may benefit both economies as long as the degree of IPR protection is appropriately chosen. Thus it is possible to argue the existence of an optimal degree of IPR protection in the South, which may differentiate it from that in the North.
North–South models of intellectual property rights: an empirical critique
Review of World Economics, 2012
Do Southern intellectual property rights (IPRs) affect Northern innovation? There is much theoretical debate on the impact of IPRs in the South on the incentives of Northern firms to innovate and transfer technologies to the South. While empirical research exists on the effects of Southern IPRs on Northern technology transfers, empirical evidence on the effects of Southern IPRs on Northern innovation is absent. This paper seeks to fill that gap. Using a comprehensive micro-database of US multinational firms and their foreign affiliates in developed countries, this study finds that patent protection in the South has statistically insignificant effects on the research and development of these firms. Rather, the patent regimes of developed countries matter significantly to the R&D of these firms. Developing countries constitute a relatively small share of the world market so that variations in the patent rights of developing economies have contributed marginally to Northern incentives for R&D.
A north–south model of intellectual property rights protection and skill accumulation
Journal of Development Economics, 2008
This paper examines how stronger intellectual property rights (IPR) protection in the south affects the processes of R&D investment, technology transfer and skill accumulation. It finds that stronger IPR protection has only a temporary impact on the innovation rate while it has a negative impact on the long-run imitation rate. In the north, the impact on the process of skill accumulation is negative and increases the within-country wage inequality. In the south, the impact is ambiguous and depends on the externality that skill accumulation generates on the process of education. In addition, the paper shows that skills play a crucial role in attracting FDI inflows, and strengthening IPR protection may be ineffective in attracting technological knowledge when the level of local skill is low.
Intellectual property rights, foreign direct investment and economic growth
2018
The objective of this study is to investigate the moderating role of IPR on the impact of FDI inflows on economic growth. By include an interaction term for FDI and IPR in each model, Two-step System GMM was applied for three proxies of IPR, namely patent, trademark and industrial design on a panel of 103 countries from 1998 to 2013. The result shows that interaction between FDI-trademark and FDI-design obtained a positive and significant result towards economic growth. It can be concluded that countries with high IPR’s could enhance their economic growth via higher inflows of FDI. A strict enforcement of IPR is vital in ensuring positive impact on economic growth as investors preferably place the FDI in a safe and secure nation that promises enforcement of law against imitation.
International Journal of Technology Management, 2000
This paper provides an overview of theoretical mechanisms by which the strength of an economy's intellectual property rights system could affect inward flows of foreign direct investment and technology licensing. It also reviews briefly the available econometric and survey evidence on these questions and lists new estimates suggesting that the international distribution of US investment in manufacturing is sensitive to variations in patent rights across countries. Intellectual property rights appear to be an important component of broader economic and regulatory policies in terms of attracting direct investment. However, concerns persist that stronger rights will reduce competition and access to information in developing economies as the new global system is phased in. Thus, the paper also discusses issues of competition policy that arise in the context of intellectual property protection.
GGGI Management Review, 2016
In the globalizing economy, developing countries and those on the periphery of developing are moving to strengthen their S&T capabilities with the aim of reaching the status of emerging economies. Many of the technologies responsible for this transitional phase are bundle with policies that could either divert country resources or stimulate technological learning depending on the strength of intellectual property rights regime adopted. The recent WTO’s TRIPS Agreement seeks to encourage creations and inventions through various commercialization mechanisms with the adoption of a uniform policy. However, the agreement is tilted towards a single, strict and standardize document that equates all countries, irrespective of its economic demands and technological capabilities. This study attempts to differentiate the needs of developing countries through the analysis of FDI inflows and IP protection regimes: a) strong, b) weak. The paper is divided into two sections. The first part deals with foreign firms’ behaviors and investment towards varying degrees of IP protection in developing countries. The other section complements by detailing factors responsible for technology spillovers from MNCs. From the analysis, FDI inflows show a mixed result and do not necessarily increases as countries move towards stronger IPR protection due to Dunning’s three paradigms – Ownership, Localization & Internalization (OLI). More so, the tightening of IPR would stifle technology spillovers that are considered an essential component for stimulating local capabilities in developing countries. The paper further proposes for the adoption of flexible IPR regimes that is aligned on a country’s technological capability and innovative capacity similar to the Principle of Common but Differentiated Responsibilities and Respected Capabilities.
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.
Intellectual property rights and innovation in developing countries
This paper studies intellectual property rights (IPRs) and innovation in developing countries. A model is developed to illustrate the trade-off between imitating foreign technologies and encouraging domestic innovation in a developing country's choice of IPRs. It is shown that innovations in a developing country increase in its IPRs, and a country's IPRs can depend on its level of development non-monotonically, first decreasing and then increasing. Empirical analysis, with a panel of data for 64 developing countries, confirms both the positive impact of IPRs on innovations in developing countries and the presence of a U-shaped relationship between IPRs and economic development. D