Knowledge diffusion from FDI and Intellectual Property Rights
AbstractWe 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 InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 168.
Date of creation: Feb 2011
Date of revision:
Find related papers by JEL classification:
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property Rights
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
- NEP-CSE-2011-02-26 (Economics of Strategic Management)
- NEP-IPR-2011-02-26 (Intellectual Property Rights)
- NEP-KNM-2011-02-26 (Knowledge Management & Knowledge Economy)
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