Intellectual Property Protection in Emerging Economies and Trade Related Intellectual Property Rights
33 Pages Posted: 2 Dec 2016
Date Written: November 30, 2016
In a perfect competition market system, there is no firm with market power, differentiated products, and there are no restrictions on entry or exit. However, economists have argued that knowledge serves as the competitive advantage in a perfect market. Such knowledge is used in the production of superior products, better methods of production, and gaining information that other organizations lack.
Firms obtain knowledge through engaging in research and development. They require incentives to engage in research and development activities with the aim of creating knowledge or technologies that offer them a superior competitive advantage. Different countries have legal instruments that aim to protect such knowledge, known as intellectual properties. Intellectual property instruments include patents, copyright, trademarks, and trade secrets. Intellectual property protection enables organizations to undertake research and development with certainty that they will recoup their costs and obtain financial benefits.
Intellectual property protection is important to emerging economies because it helps in the creation of new knowledge, broad sharing of knowledge, and promotes economic growth. Economic growth is through increased foreign direct investments, transfers of innovations, creation of new enterprises, and lowering transaction costs in trade. However, intellectual property protection also has negative impacts on emerging economies. It increases the market power of the rights owners, which impacts competition and pricing of products. It also leads to labor displacements in the short-term as people in newly protected sectors become temporarily unemployed. It could also deter foreign direct investment because foreign firms may prefer licensing instead of direct investment. Intellectual property protection may raise the cost of domestic innovation. Emerging economies may also experience problems in the administration and enforcement of protection in their countries.
The benefits of intellectual property protection can be enhanced through the creation of an environment that favors economic growth. Emerging economies can obtain the benefits of intellectual property protections through an enactment of competitive policies, promotion of competitive practices, and increase the ability to utilize intellectual property protection.
Keywords: Intellectual Property, International Law
JEL Classification: K00
Suggested Citation: Suggested Citation