We integrate international business theory on foreign direct investment (FDI) with institutional theory on intellectual property rights (IPR) to explain characteristics and behaviour of foreign investment subsidiaries in Central East Europe, a region with an IPR regime-gap vis-à-vis West European countries. We start from the premise that FDI may play a crucial role for technological catch-up development in Central East Europe via technology and knowledge transfer. By use of a unique dataset generated at the IWH in collaboration with a European consortium in the framework of an EU-project, we assess the role played by the IPR regimes in a selection of CEE countries as a factor for corporate governance and control of foreign invested subsidiaries, for their own technological activity, their trade relationships, and networking partners for technological activity. As a specific novelty to the literature, we assess the in influence of the strength of IPR regimes on corporate control of subsidiaries and conclude that IPR-sensitive foreign investments tend to have lower functional autonomy, tend to cooperate more intensively within their transnational network and yet are still technologically more active than less IPR-sensitive subsidiaries. In terms of economic policy, this leads to the conclusion that the FDI will have a larger developmental impact if the IPR regime in the host economy is sufficiently strict.
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Paper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number
4-09.
Find related papers by JEL classification: F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
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