Contracts, Intellectual Property Rights, and Multinational Investment in Developing Countries

33 Pages Posted: 4 Aug 2000 Last revised: 8 Oct 2010

See all articles by James R. Markusen

James R. Markusen

University of Colorado at Boulder - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: March 1998

Abstract

The institution and enforcement of property rights and contracts have been an important policy issue for the developing countries, the transition economies, and the developed countries in the 1990s. This has led to the development of a literature on technology transfer and how property rights might affect such transfers and host-country welfare. Much of this literature is non-strategic, with large numbers of northern' innovative firms and southern' imitators, and focusses on endogenous R&D and imitation levels. This paper takes a different and complementary approach, developing a strategic model in which local managers learn the multinational's technology and can defect to start a rival firm. If contract enforcement leads the MNE to shift from exporting to producing inside the host country, both the host country and the MNE are better off. If the MNE had established a subsidiary prior to the establishment of enforcement, the host country is indifferent or worse off by enforcement. In the latter case, rents are transferred from the local manager to the MNE.

Suggested Citation

Markusen, James R., Contracts, Intellectual Property Rights, and Multinational Investment in Developing Countries (March 1998). NBER Working Paper No. w6448. Available at SSRN: https://ssrn.com/abstract=226194

James R. Markusen (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER) ( email )

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