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Intellectual Property and the Organization of the Global Value Chain

Author

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  • Ottaviano, Gianmarco
  • Bolatto, Stefano
  • Naghavi, Alireza
  • Kejžar, Katja Zajc

Abstract

This paper introduces the concept of intangible assets in a property rights model of sequential supply chains. Firms transmit knowledge to their suppliers to facilitate input customization. Yet, to avoid knowledge dissipation, they must protect the transmitted intangibles, the cost of which depends on the knowledge intensity of inputs and the quality of institutions protecting intellectual property rights (IPR) in supplier locations. When input knowledge intensity increases (decreases) downstream and suppliers' investments are complements, the probability of integrating a randomly selected input is decreasing (increasing) in IPR quality and increasing (decreasing) in the relative knowledge intensity of downstream inputs. Opposite but weaker predictions hold when suppliers' investments are substitutes. Comprehensive trade and FDI data on Slovenian firms' value chains provide evidence in support of our model's predictions. They also suggest that, in line with our model, better institutions may have very different effects on fi rm organization depending on whether they improve the protection of tangible or intangible assets.

Suggested Citation

  • Ottaviano, Gianmarco & Bolatto, Stefano & Naghavi, Alireza & Kejžar, Katja Zajc, 2019. "Intellectual Property and the Organization of the Global Value Chain," CEPR Discussion Papers 14256, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:14256
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    Cited by:

    1. Peter Eppinger & Hong Ma, 2023. "Optimal Ownership and Firm Performance: An Analysis of China’s FDI Liberalization," CESifo Working Paper Series 10551, CESifo.
    2. Kukharskyy, Bohdan, 2020. "A tale of two property rights: Knowledge, physical assets, and multinational firm boundaries," Journal of International Economics, Elsevier, vol. 122(C).
    3. Alexander Jaax & Sébastien Miroudot, 2021. "Capturing value in GVCs through intangible assets: The role of the trade–investment–intellectual property nexus," Journal of International Business Policy, Palgrave Macmillan, vol. 4(3), pages 433-452, September.
    4. Eppinger, Peter & Kukharskyy, Bohdan, 2021. "Contracting institutions and firm integration around the world," European Economic Review, Elsevier, vol. 137(C).

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    More about this item

    Keywords

    Sequential production; Intellectual property; Intangible assets; Appropriability; Stage complementarity; Upstreamness; Firm organization; Outsourcing; Vertical integration;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • 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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