Intellectual Property Protection and the Industrial Composition of Multinational Activity

18 Pages Posted: 26 Feb 2016

See all articles by Olena Ivus

Olena Ivus

Smith School of Business

Walter G. Park

American University - Department of Economics

Kamal Saggi

Vanderbilt University - College of Arts and Science - Department of Economics

Date Written: April 2016

Abstract

In a North‐South model with endogenous foreign direct investment (FDI), we examine the impact of Southern intellectual property rights (IPR) protection on the mode and industrial composition of international technology transfer. A novel feature of the model is that, due to technological reasons, industries differ with respect to their susceptibility to imitation. In equilibrium, licensing occurs in industries where the risk of imitation is low and FDI where it is of intermediate magnitude. Stronger IPRs in the South (1) alter the industrial composition of multinational activity toward licensing at the expense of FDI; (2) reduce local imitation; and (3) increase licensing and, to a lesser extent, FDI.

JEL Classification: F10, O34

Suggested Citation

Ivus, Olena and Park, Walter G. and Saggi, Kamal, Intellectual Property Protection and the Industrial Composition of Multinational Activity (April 2016). Economic Inquiry, Vol. 54, Issue 2, pp. 1068-1085, 2016. Available at SSRN: https://ssrn.com/abstract=2738300 or http://dx.doi.org/10.1111/ecin.12314

Olena Ivus (Contact Author)

Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Walter G. Park

American University - Department of Economics ( email )

4400 Massachusetts Avenue, N.W.
Washington, DC 20016-8029
United States

Kamal Saggi

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States

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