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How does intellectual property protection in the host country affect outward foreign direct investment?

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  • Li, Fengchun
  • Liang, Ting
  • Zhou, Xiang

Abstract

This paper empirically analyses the impact of a host country’s intellectual property (IP) protection on Chinese outward foreign direct investment (OFDI), employing panel data of 109 host countries’ FDI stocks and IP protection levels. Based on the regression results, it is concluded that the host country’s IP protection has a significant impact on Chinese OFDI. By including an interaction term into the regression, it can be seen that a host country’s trade openness enhances the influence of intellectual property protection on OFDI. Using subsample regressions, it was found that the positive effect of the protection of IP rights by the host country on China’s OFDI is stronger in the countries along China’s ‘Belt and Road’ initiative. For a subsample of countries with a lower degree of IP protection than China, the positive effect of IP protection is weaker than in ones with a higher IP protection level. The results obtained through a threshold regression, show that host countries can be divided into three categories, based on gross domestic product per capita, namely low, medium and high development levels. The higher the level of economic development of the host country, the greater the impact of IP protection on China’s OFDI. The host countries are also categorised into low-, medium- and high-level IP protection levels. As the level of a host country’s IP protection improves, it promotes OFDI from China.

Suggested Citation

  • Li, Fengchun & Liang, Ting & Zhou, Xiang, 2021. "How does intellectual property protection in the host country affect outward foreign direct investment?," Research in International Business and Finance, Elsevier, vol. 58(C).
    • Handle: RePEc:eee:riibaf:v:58:y:2021:i:c:s0275531921000970
    DOI: 10.1016/j.ribaf.2021.101476
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    References listed on IDEAS

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    Cited by:

    1. Ouyang, Shanshan & Li, Yanxi & Wu, Haowen & Zhao, Heng & Xu, Runxiang, 2023. "Structure and evolution of the greenfield FDI network along the belt and road," Research in International Business and Finance, Elsevier, vol. 64(C).
    2. Schclarek, Alfredo & Xu, Jiajun & Amuchastegui, Pedro, 2022. "Panda bond financing of the Belt and Road Initiative: An analysis of monetary mechanisms and financial risks," Research in International Business and Finance, Elsevier, vol. 61(C).
    3. Ren, Meixu & Zhao, Jinxuan & Zhao, Jingmei, 2023. "Why is it difficult for Chinese companies to operate across regions in China?—Evidence from zombie companies," International Review of Financial Analysis, Elsevier, vol. 87(C).

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