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R&D Productivity and Intellectual Property Rights Protection Regimes

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We study firms' preferences towards intellectual property rights (IPR) regimes in a North-South context, using a simple duopoly model where a 'North' and a 'South' firm compete in a third market. Unlike other contributions in this field, we explicitly introduce the South's capability to undertake cost-reducing R&D, but maintain the South's inferiority in utilizing and managing its R&D. In contrast to traditional results, we show that the North may encourage lax IPR protection provided that its South rival's R&D productivity is sufficiently high, while the South may find it in its best interest to strictly enforce IPR protection if its R&D productivity is low. In this sense, our results do not support the idea of universal or uniform IPR protection regime. In addition, we find that if firms are allowed to agree on any level of information exchange when IPR protection is strictly enforced, such an exchange can always be established as long as each firm is ensured that what it gets to utilize in return is greater than a half of what it gives to its rival.

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File URL: http://www.lboro.ac.uk/departments/sbe/RePEc/lbo/lbowps/currentIPR.pdf
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Bibliographic Info

Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2009_06.

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Date of creation: Mar 2009
Date of revision: Mar 2009
Handle: RePEc:lbo:lbowps:2009_06

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Keywords: intellectural property rights (IPRs); cost-reducing R&D; R&D productivity; information exchange.;

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  1. Grossman, G.M. & Lai, E., 2001. "International Protection of intellectual Property," Papers 215, Princeton, Woodrow Wilson School - Public and International Affairs.
  2. J. Poyago-Theotoky,, . "R&D Competition with Asymmetric Firms," Discussion Papers 96/13, University of Nottingham, School of Economics.
  3. Sanjaya Lall and Manuel Albaladejo, . "Indicators of the Relative Importance of IPRs In Developing Countries," QEH Working Papers qehwps85, Queen Elizabeth House, University of Oxford.
  4. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December.
  5. Diwan, Ishac & Rodrik, Dani, 1989. "Patents, appropriate technology, and North-South trade," Policy Research Working Paper Series 251, The World Bank.
  6. Barros,P.P. & Nilssen,T., 1999. "Industrial policy and firm heterogeneity," Memorandum 02/1999, Oslo University, Department of Economics.
  7. De Bondt, Raymond & Slaets, Patrick & Cassiman, Bruno, 1992. "The degree of spillovers and the number of rivals for maximum effective R &D," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 35-54, March.
  8. Lai, Edwin L. -C. & Qiu, Larry D., 2003. "The North's intellectual property rights standard for the South?," Journal of International Economics, Elsevier, vol. 59(1), pages 183-209, January.
  9. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-21, January.
  10. Kultti, Klaus & Takalo, Tuomas, 1998. "R&D spillovers and information exchange," Economics Letters, Elsevier, vol. 61(1), pages 121-123, October.
  11. Deardorff, Alan V, 1992. "Welfare Effects of Global Patent Protection," Economica, London School of Economics and Political Science, vol. 59(233), pages 35-51, February.
  12. Zigic, Kresimir, 1998. "Intellectual property rights violations and spillovers in North-South trade," European Economic Review, Elsevier, vol. 42(9), pages 1779-1799, November.
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