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Market structure, FDI, imitation and innovation: a model of North-South intellectual property rights conflict

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  • Ziyin Zhuang
  • Wei Zou

Abstract

We develop an extended North-South model to analyse the US-China IPRs conflict and possible policies. In our model, innovation in the North (US), imitation in the South (China), and Foreign Direct Investment (FDI) are all endogenous. We predict that whether tighter IPRs benefit the US or China depends crucially on market structure. In an oligopoly market induced by vertical innovation, tighter IPRs hurt both economies; while, in a monopolistic competition market induced by horizontal innovation, tighter IPRs benefit both economies as long as the degree of IPRs is appropriately chosen. We prove the existence of an optimal degree of IPRs protection in China, which may differentiate it from that in the US.

Suggested Citation

  • Ziyin Zhuang & Wei Zou, 2010. "Market structure, FDI, imitation and innovation: a model of North-South intellectual property rights conflict," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 8(3), pages 253-267.
    • Handle: RePEc:taf:jocebs:v:8:y:2010:i:3:p:253-267
    DOI: 10.1080/14765284.2010.493640
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    References listed on IDEAS

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    1. Helleiner, G.K., 1989. "Transnational corporations and direct foreign investment," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 27, pages 1441-1480, Elsevier.
    2. Keith E. Maskus, 2000. "Intellectual Property Rights in the Global Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 99.
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