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Intellectual property rights and foreign direct investment: A welfare analysis

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  • Tanaka, Hitoshi
  • Iwaisako, Tatsuro

Abstract

This paper examines how intellectual property rights (IPR) protection affects innovation and foreign direct investment (FDI) using a North–South quality-ladder model incorporating the exogenous and costless imitation of technology and subsidy policies for both R&D and FDI. We show that for the interior steady state to be stable, either R&D or FDI subsidy rates must be positive. Our findings also indicate that strengthening IPR protection promotes both innovation and FDI. Moreover, a strengthening of IPR protection can also improve welfare if the initial IPR protection in the South is weak and the R&D subsidy rate is not too high.

Suggested Citation

  • Tanaka, Hitoshi & Iwaisako, Tatsuro, 2014. "Intellectual property rights and foreign direct investment: A welfare analysis," European Economic Review, Elsevier, vol. 67(C), pages 107-124.
  • Handle: RePEc:eee:eecrev:v:67:y:2014:i:c:p:107-124
    DOI: 10.1016/j.euroecorev.2014.01.013
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    References listed on IDEAS

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    1. Tanaka, Hitoshi & Iwaisako, Tatsuro & Futagami, Koichi, 2007. "Dynamic analysis of innovation and international transfer of technology through licensing," Journal of International Economics, Elsevier, vol. 73(1), pages 189-212, September.
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    Citations

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    Cited by:

    1. Chen, Hung-Ju, 2019. "Innovation and FDI: Does the Target of Intellectual Property Rights Matter?," MPRA Paper 94692, University Library of Munich, Germany.
    2. Manuel A. Gómez & Tiago Neves Sequeira, 2016. "R&D Subsidies and Foreign Direct Investment," Open Economies Review, Springer, vol. 27(4), pages 769-793, September.
    3. 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.
    4. Chu, Angus C. & Cozzi, Guido & Furukawa, Yuichi, 2013. "A Schumpeterian Analysis of Monetary Policy, Innovation and North-South Technology Transfer," Economics Working Paper Series 1319, University of St. Gallen, School of Economics and Political Science.
    5. Iwaisako, Tatsuro, 2013. "Welfare effects of patent protection and productive public services: Why do developing countries prefer weaker patent protection?," Economics Letters, Elsevier, vol. 118(3), pages 478-481.
    6. repec:eee:iburev:v:28:y:2019:i:2:p:344-358 is not listed on IDEAS
    7. repec:eee:jeborg:v:151:y:2018:i:c:p:171-190 is not listed on IDEAS
    8. Kiyoka Akimoto & Takaaki Morimoto, 2017. "Examination and Approval of New Products in an Endogenous Growth Model," Discussion Papers in Economics and Business 17-33, Osaka University, Graduate School of Economics.
    9. Tian, Xian-Liang, 2017. "Sector-specific IPR protection to overcome technology-skill mismatch in South? A simple model," Mathematical Social Sciences, Elsevier, vol. 85(C), pages 44-51.
    10. repec:bla:reviec:v:26:y:2018:i:5:p:1101-1129 is not listed on IDEAS
    11. repec:bla:reviec:v:25:y:2017:i:5:p:1130-1154 is not listed on IDEAS
    12. Kazuyoshi Ohki, 2017. "International intellectual property rights protection and economic growth with costly transfer," Review of International Economics, Wiley Blackwell, vol. 25(5), pages 1130-1154, November.
    13. Suzuki, Keishun, 2014. "Southern Innovation and Foreign Direct Investment," MPRA Paper 57054, University Library of Munich, Germany.

    More about this item

    Keywords

    Foreign direct investment; Innovation; Intellectual property rights protection;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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