Can IPR Affect MNE's Entry Modes? The Chilean Case

28 Pages Posted: 2 Nov 2017

See all articles by Gustavo J. Canavire-Bacarreza

Gustavo J. Canavire-Bacarreza

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

Luis Castro Penarrieta

Universidad Privada Boliviana (UPB)

Date Written: October 30, 2017

Abstract

This paper analyzes the effect of stronger Intellectual Property Rights (IPR) on the entry modes chosen by MNEs in the Chilean market. MNEs can choose between exporting, introducing Foreign Direct Investment (FDI) and licensing to a domestic firm in Chile. We use plant-level data for the 2001–2007 and exploite the exogenous reform of IPR in Chile in 2005 to examine the effect of the change in IPR on the overall foreign presence in Chile, controlling for the activities of industries where high levels of technology transfer and imitation are important factors. The main results show that stronger IPR change the mode of entry chosen by MNEs. In this case, FDI is replaced by licensing. This is explained by Chile’s high absorptive capacity during this period. Moreover, we test whether this effect differs across high-tech and low-tech industries and conclude that the displacement of FDI is less severe in high-tech industries.

Keywords: Technology Licensing, Productivity, Spillovers, Chile

JEL Classification: O34, O44, C5, K2

Suggested Citation

Canavire Bacarreza, Gustavo Javier and Castro Penarrieta, Luis, Can IPR Affect MNE's Entry Modes? The Chilean Case (October 30, 2017). Center for Research in Economics and Finance (CIEF), Working Papers, No. 17-18. Available at SSRN: https://ssrn.com/abstract=3063304 or http://dx.doi.org/10.2139/ssrn.3063304

Gustavo Javier Canavire Bacarreza (Contact Author)

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
Germany

Luis Castro Penarrieta

Universidad Privada Boliviana (UPB) ( email )

Nuestra Señora de La Paz
Bolivia
Bolivia

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