Using a unique firm-level dataset this study shows that, contrary to the hopes of transition economies, foreign investors in the region are characterized by low, rather than high, R&D intensity. The results also indicate that investors with higher R&D spending are more likely to engage in non-manufacturing projects than in local production. The empirical analysis links these findings to weak protection of intellectual property rights (IPRs). It shows that weak protection deters foreign investment. This negative effect is especially strong in those technology-intensive sectors that, according to surveys, rely heavily on IPRs. Weak IPR protection also encourages investors to undertake non-manufacturing projects rather than local production. The study contributes to the literature on transition, in which the issue of IPR protection has been neglected. It also adds to the literature on intellectual property rights by providing empirical evidence on the effect of IPR protection on the composition of FDI inflows.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
2228.
Find related papers by JEL classification: F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
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