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Knowledge diffusion from FDI and Intellectual Property Rights

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  • Roger Smeets

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  • Albert de Vaal
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    Abstract

    We study the extent to which a country's strength of Intellectual Property Rights (IPR) protection mediates knowledge spillovers from Foreign Direct Investment (FDI). Following the opposing views in the IPR debate, we propose a negative effect of IPR strength on unintentional horizontal (intra-industry) knowledge diffusion. Using a unique firm-level dataset of large, publicly traded firms in 22 (mostly) developed countries, we find partial support for these expectations. Strong IPR indeed reduces horizontal knowledge diffusion, while it stimulates backward (to suppliers) knowledge diffusion. Somewhat unexpectedly however, we also find that forward (to customers) knowledge diffusion decreases with IPR strength. In general, and in line with earlier literature, the results regarding backward knowledge diffusion are most robust to changes in model specification. Our results contribute to the debate regarding the desirability of strengthening national IPR systems, and suggest that local firms might indeed benefit from this through their (backward) linkages with multinationals. Additionally, our results suggest that the moderating effect of IPR strength might partly explain the inconclusive results in the FDI knowledge diffusion literature.

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    Bibliographic Info

    Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 168.

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    Date of creation: Feb 2011
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    Handle: RePEc:cpb:discus:168

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    1. Rachel Griffith & Stephen Redding & John Van Reenen, 2000. "Mapping the two faces of R&D: productivity growth in a panel of OECD industries," IFS Working Papers W00/02, Institute for Fiscal Studies.
    2. Saggi, Kamal, 2000. "Trade, foreign direct investment, and international technology transfer : a survey," Policy Research Working Paper Series 2349, The World Bank.
    3. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
    4. Branstetter, Lee & Fisman, Ray & Foley, C. Fritz & Saggi, Kamal, 2011. "Does intellectual property rights reform spur industrial development?," Journal of International Economics, Elsevier, vol. 83(1), pages 27-36, January.
    5. Beata Smarzynska Javorcik & Mariana Spatareanu, 2003. "To share or not to share : does local participation matter for spillovers from foreign direct investment?," Policy Research Working Paper Series 3118, The World Bank.
    6. Maurice Kugler, 2006. "Spillovers From Foreign Direct Investment:Within Or Between Industries?," BORRADORES DE ECONOMIA 003523, BANCO DE LA REPÚBLICA.
    7. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
    8. Julia I. Lane & John C. Haltiwanger & James Spletzer, 1999. "Productivity Differences across Employers: The Roles of Employer Size, Age, and Human Capital," American Economic Review, American Economic Association, vol. 89(2), pages 94-98, May.
    9. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
    10. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. You Didn’t Think That: Intellectual Property Rights
      by Kevin Behne in Blogal Prosperity on 2012-08-14 18:54:49
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    Cited by:
    1. Tomas Havranek & Zuzana Irsova, 2011. "Determinants of Horizontal Spillovers from FDI: Evidence from a Large Meta-Analysis," Working Papers 2011/07, Czech National Bank, Research Department.

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