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Patent Laws, Product Life-Cycle Lengths, and Multinational Activity

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  • L. Kamran Bilir

Abstract

Do intellectual property rights influence multinationals' manufacturing location decisions? My theoretical model indicates that countries with strong patent laws attract multinational activity, but only in sectors with relatively long product life cycles. By contrast, firms with short life-cycle technologies are insensitive, because offshore imitation is less likely to succeed before obsolescence. I document strong empirical regularities consistent with the model using a panel dataset on the global operations of US-based multinational firms and a new measure of product obsolescence. Moreover, my identification strategy allows me to isolate the causal effect of patent laws on multinational activity.

Suggested Citation

  • L. Kamran Bilir, 2014. "Patent Laws, Product Life-Cycle Lengths, and Multinational Activity," American Economic Review, American Economic Association, vol. 104(7), pages 1979-2013, July.
  • Handle: RePEc:aea:aecrev:v:104:y:2014:i:7:p:1979-2013
    Note: DOI: 10.1257/aer.104.7.1979
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Arghya GHOSH & ISHIKAWA Jota, 2018. "Trade Liberalization, Absorptive Capacity and the Protection of Intellectual Property Rights," Discussion papers 18022, Research Institute of Economy, Trade and Industry (RIETI).
    2. Hanlon, Michelle & Lester, Rebecca & Verdi, Rodrigo, 2015. "The effect of repatriation tax costs on U.S. multinational investment," Journal of Financial Economics, Elsevier, vol. 116(1), pages 179-196.
    3. Chen, Xiaoping & Lu, Yi & Zhu, Lianming, 2017. "Product cycle, contractibility, and global sourcing," Journal of Development Economics, Elsevier, vol. 127(C), pages 283-296.
    4. Qing Liu & Larry D Qiu, 2017. "Effects of Intermediate Input Tariff Reduction on Innovations in China," Working Papers 022017, Hong Kong Institute for Monetary Research.
    5. Canals, Claudia & Şener, Fuat, 2014. "Offshoring and intellectual property rights reform," Journal of Development Economics, Elsevier, vol. 108(C), pages 17-31.
    6. Stiebale, Joel, 2016. "Cross-border M&As and innovative activity of acquiring and target firms," Journal of International Economics, Elsevier, vol. 99(C), pages 1-15.
    7. Liu, Qing & Qiu, Larry D., 2016. "Intermediate input imports and innovations: Evidence from Chinese firms' patent filings," Journal of International Economics, Elsevier, vol. 103(C), pages 166-183.
    8. repec:eee:inecon:v:109:y:2017:i:c:p:235-245 is not listed on IDEAS
    9. Kamal Saggi, 2016. "Trade, Intellectual Property Rights, and the World Trade Organization," Vanderbilt University Department of Economics Working Papers 16-00014, Vanderbilt University Department of Economics.
    10. repec:eee:corfin:v:45:y:2017:i:c:p:360-377 is not listed on IDEAS
    11. Robert Sasse, 2016. "Social Media against the Backdrop of Socioeconomic Change," International Journal of Marketing Studies, Canadian Center of Science and Education, vol. 8(6), pages 58-62, December.
    12. Smeets, Roger & de Vaal, Albert, 2016. "Intellectual Property Rights and the productivity effects of MNE affiliates on host-country firms," International Business Review, Elsevier, vol. 25(1), pages 419-434.
    13. GHOSH, Arghya & ISHIKAWA, Jota, 2018. "Trade Liberalization, Absorptive Capacity and the Protection of Intellectual Property Rights," Discussion paper series HIAS-E-67, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    14. Fernandez Donoso, Jose, 2014. "Do complex inventions need less international patent protection?," Economics Letters, Elsevier, vol. 125(2), pages 278-281.
    15. Amore, Mario Daniele, 2015. "Companies learning to innovate in recessions," Research Policy, Elsevier, vol. 44(8), pages 1574-1583.
    16. Olena Ivus & Walter Park & Kamal Saggi, 2016. "Intellectual Property Protection And The Industrial Composition Of Multinational Activity," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1068-1085, April.
    17. Olena Ivus & Walter Park & Kamal Saggi, 2015. "Patent Protection and the Industrial Composition of Multinational Activity: Evidence from U.S. Multinational Firms," Vanderbilt University Department of Economics Working Papers 15-00014, Vanderbilt University Department of Economics.
    18. Jenny X. Lin & William Lincoln, 2017. "Pirate’s Treasure," Working Papers 17-51, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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