Can Licensing Induce Productivity? Exploring the IPR Effect

55 Pages Posted: 2 Nov 2017

See all articles by Luis Castro Penarrieta

Luis Castro Penarrieta

Universidad Privada Boliviana (UPB)

Gustavo J. Canavire-Bacarreza

Inter-American Development Bank (IDB); IZA Institute of Labor Economics

Date Written: October 30, 2017


Licensing is one of the main channels for technology transfer from foreign owned multinational enterprises (MNEs) to domestic plants. This transfer occurs within industries and across industries, which results in technology spillovers that can affect both intra- and inter-industry productivity. We propose a theoretical model that predicts that this effect can be enhanced by the implementation of stronger intellectual property rights (IPR). Using Chilean plant-level data for the 2001–2007 period and exogenous variation from a reform in 2005, we test our theoretical predictions and find positive inter-industry effects, which result in higher productivity for domestic plants. However, there are negative spillovers when licensing is implemented within the same industry. We also test for the effect of stronger IPR and find that stronger IPR reduces intra-sector spillovers but increases inter-industry spillovers. Moreover, the IPR effect is stronger on firms that are, on average, smaller and have low productivity. Our results are robust not only to a series of definitions of IPR, licensing and productivity but also to a set of different specifications.

Keywords: Technology Licensing, Productivity, Spillovers, Chile

JEL Classification: O34, O44, C5, K2

Suggested Citation

Castro Penarrieta, Luis and Canavire Bacarreza, Gustavo Javier, Can Licensing Induce Productivity? Exploring the IPR Effect (October 30, 2017). Center for Research in Economics and Finance (CIEF), Working Papers, No. 17-19. Available at SSRN: or

Luis Castro Penarrieta (Contact Author)

Universidad Privada Boliviana (UPB) ( email )

Nuestra Señora de La Paz

Gustavo Javier Canavire Bacarreza

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072

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