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Intellectual property rights, informal economy, and FDI into developing countries

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  • Lee, Minsoo
  • Alba, Joseph D.
  • Park, Donghyun

Abstract

We explore the relationship between intellectual property rights (IPR), the informal economy, and foreign direct investment (FDI) into developing countries. Intuitively, stronger IPR protection attracts more FDI in countries with small informal economies but not in countries with large informal economies. The intuition is that the informal economy is a proxy for the quality of institutions. In institutionally strong countries, IPR protection promotes FDI by reducing illegal imitation and freeing up more resources for MNCs. Our empirical analysis, based on a threshold effect model, provides some evidence supportive of our model.

Suggested Citation

  • Lee, Minsoo & Alba, Joseph D. & Park, Donghyun, 2018. "Intellectual property rights, informal economy, and FDI into developing countries," Journal of Policy Modeling, Elsevier, vol. 40(5), pages 1067-1081.
  • Handle: RePEc:eee:jpolmo:v:40:y:2018:i:5:p:1067-1081
    DOI: 10.1016/j.jpolmod.2018.07.003
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    More about this item

    Keywords

    Intellectual property rights; Foreign direct investment; Informal economy; Institutions; Asia;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • 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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