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Contracts, Intellectual Property Rights, and Multinational Investment in Developing Countries

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  • James R. Markusen

Abstract

The institution and enforcement of property rights and contracts have been an important policy issue for the developing countries, the transition economies, and the developed countries in the 1990s. This has led to the development of a literature on technology transfer and how property rights might affect such transfers and host-country welfare. Much of this literature is non-strategic, with large numbers of northern' innovative firms and southern' imitators, and focusses on endogenous R&D and imitation levels. This paper takes a different and complementary approach, developing a strategic model in which local managers learn the multinational's technology and can defect to start a rival firm. If contract enforcement leads the MNE to shift from exporting to producing inside the host country, both the host country and the MNE are better off. If the MNE had established a subsidiary prior to the establishment of enforcement, the host country is indifferent or worse off by enforcement. In the latter case, rents are transferred from the local manager to the MNE.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6448.

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Date of creation: Mar 1998
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Publication status: published as Markusen, James R. "Intellectual Property Rights, And Multinational Investment In Developing Countries," Journal of International Economics, 2001, v53(1,Feb), 189-204.
Handle: RePEc:nbr:nberwo:6448

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  1. James R. Markusen & Anthony J. Venables, 1995. "Multinational Firms and The New Trade Theory," NBER Working Papers 5036, National Bureau of Economic Research, Inc.
  2. James R. Markusen, 1998. "Contracts, Intellectual Property Rights, and Multinational Investment in Developing Countries," NBER Working Papers 6448, National Bureau of Economic Research, Inc.
  3. Elhanan Helpman, 1992. "Innovation, Imitation, and Intellectual Property Rights," NBER Working Papers 4081, National Bureau of Economic Research, Inc.
  4. Wilfred J. Ethier & James R. Markusen, 1991. "Multinational Firms, Technology Diffusion and Trade," NBER Working Papers 3825, National Bureau of Economic Research, Inc.
  5. Blomström, Magnus & Kokko, Ari, 1996. "Multinational Corporations and Spillovers," Working Paper Series in Economics and Finance 99, Stockholm School of Economics.
  6. Glass, Amy Jocelyn & Saggi, Kamal, 2002. "Intellectual property rights and foreign direct investment," Journal of International Economics, Elsevier, vol. 56(2), pages 387-410, March.
  7. Grossman, G.M. & Helpman, E., 1989. "Quality Ladders And Product Cycles," Papers 152, Princeton, Woodrow Wilson School - Public and International Affairs.
  8. Lai, Edwin L. -C., 1998. "International intellectual property rights protection and the rate of product innovation," Journal of Development Economics, Elsevier, vol. 55(1), pages 133-153, February.
  9. M. Scott Taylor, 1993. "TRIPS, Trade, and Technology Transfer," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 625-37, August.
  10. Diwan, Ishac & Rodrik, Dani, 1991. "Patents, appropriate technology, and North-South trade," Journal of International Economics, Elsevier, vol. 30(1-2), pages 27-47, February.
  11. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  12. Andrea Fosfuri & Massimo Motta & Thomas Ronde, 1998. "Foreign direct investments and spillovers through workers' mobility," Economics Working Papers 258, Department of Economics and Business, Universitat Pompeu Fabra.
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