Intellectual Property Rights and the Efficiency of International Production Networks: Evidence from the Automotive Industry

Abstract

This paper investigates the potential benefits of intellectual property rights (IPR) institutions for international production networks. Using unique data on manufacturer-supplier linkages in the automotive industry, we establish a positive empirical relationship between the productivity and efficiency of manufacturing firms and IPR protection in their suppliers’ locations. Notably, IPRs do not have the same impact on ownership networks, and protection of physical property rights does not generate any improvement in performance. We confirm that the results are not driven by other firm-level characteristics and address potential endogeneity concerns by employing a novel gravity-based IV approach, followed by a GMM analysis.

Keywords: International production networks, Intellectual property rights, Ownership, Internalization, Automotive industry, Knowledge dissipation, Firm efficiency

JEL Classification: F21, F23, L14, L25, L62, O34, G32