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Duration of Rent Extraction and the Entry Mode Decision of Multinational Enterprises

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  • Galina An
  • Keith E. Maskus
  • Thitima Puttitanun

Abstract

The prior literature is ambiguous about the effects of stronger intellectual property rights (IPR) on the choice of a multinational firm's mode of entry into foreign markets. However, available indexes of IPR protection exist only at the country level and do not identify interindustry variation in the ability to extract rents through exclusive rights and other factors. The authors introduce this dimension and compute a parameter that reflects the relative length of time that positive profits may be earned in various industries. Estimation results find that strengthening IPR would reduce exporting in all industries in the sample. However, it would raise (reduce) foreign direct investment, relative to licensing, in industries with shorter (longer) rent-extraction times. Copyright © 2008 The Authors. Journal compilation © 2008 Blackwell Publishing Ltd.

Suggested Citation

  • Galina An & Keith E. Maskus & Thitima Puttitanun, 2008. "Duration of Rent Extraction and the Entry Mode Decision of Multinational Enterprises," Review of Development Economics, Wiley Blackwell, vol. 12(4), pages 861-876, November.
  • Handle: RePEc:bla:rdevec:v:12:y:2008:i:4:p:861-876
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    1. World Bank, 2006. "World Development Indicators 2006," World Bank Publications, The World Bank, number 8151.
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    Cited by:

    1. Lei Yang & Yingyi Tsai & Arijit Mukherjee, 2016. "Intellectual Property Rights and the Quality of Transferred Technology in Developing Countries," Review of Development Economics, Wiley Blackwell, vol. 20(1), pages 239-249, February.
    2. Barros, Henrique M., 2011. "The Effects of Innovation Partnership, Foreign Ownership and Enhanced Management Practices on the Use of Patents in Brazilian Manufacturing," Insper Working Papers wpe_255, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    3. Marlene Grande & Aurora A. C. Teixeira, 2011. "Linking entry mode choices of MNCs with countries’ corruption. A review," OBEGEF Working Papers 008, OBEGEF - Observatório de Economia e Gestão de Fraude;OBEGEF Working Papers on Fraud and Corruption.
    4. Bruce Blonigen & Cheyney O'Fallon, 2011. "Foreign Firms and Local Communities," NBER Working Papers 17282, National Bureau of Economic Research, Inc.
    5. Quanlin Gu & Shaoan Huang & Yupeng Shi, 2015. "Legal Traditions and Foreign Ownership Modes: Evidence from China," Asian Economic Journal, East Asian Economic Association, vol. 29(4), pages 365-384, December.

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