Parallel Imports and Innovation in an Emerging Economy
This paper studies the consequences of parallel import (PI) on process innovation of firms heterogeneous in their production technology. In an international setting where foreign markets differ with respect to their intellectual property rights regime, a move by a technologically inferior firm to exploit a new unregulated market can result in imitation and PI. The impact of PI on innovation is determined by the degree of heterogeneity between firms and trade costs. Increasing trade costs shifts from the market share losses brought by PI from the more to the less productive firm. This induces the former to invest more in R&D. At this point, sales in the foreign market become a determinant of the R&D decision by the technologically inferior firm. For low levels of firm heterogeneity, PI increases output by this firm targeted for the unregulated market, hence increases its innovation efforts. A tariff policy accompanied by opening borders to PI only increases welfare when the technological gap between the two firms is sufficiently large.
|Date of creation:||Apr 2010|
|Contact details of provider:|| Postal: Corso Magenta, 63 - 20123 Milan|
Web page: http://www.feem.it/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ganslandt, Mattias & Maskus, Keith E., 2005.
"Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets,"
Working Paper Series
639, Research Institute of Industrial Economics.
- Ganslandt, Mattias & Maskus, Keith E., 2007. "Vertical distribution, parallel trade, and price divergence in integrated markets," European Economic Review, Elsevier, vol. 51(4), pages 943-970, May.
- Grossman, Gene & Lai, Edwin, 2006.
"Parallel Imports and Price Controls,"
CEPR Discussion Papers
5779, C.E.P.R. Discussion Papers.
- Raff, Horst & Schmitt, Nicolas, 2005.
"Why Parallel Trade May Raise Producers' Profits,"
Economics Working Papers
2005,07, Christian-Albrechts-University of Kiel, Department of Economics.
- Leahy, Dermot & Neary, J Peter, 1997.
"Public Policy towards R&D in Oligopolistic Industries,"
American Economic Review,
American Economic Association, vol. 87(4), pages 642-662, September.
- D Leahy & J.P. Neary, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEP Discussion Papers dp0270, Centre for Economic Performance, LSE.
- Leahy, Dermot & Neary, J Peter, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEPR Discussion Papers 1243, C.E.P.R. Discussion Papers.
- Dermot Leahy & J. Peter Neary, 1995. "Public policy towards R&D in oligopolistic industries," Working Papers 199511, School of Economics, University College Dublin.
- Changying Li, 2006. "Competition, Parallel Imports And Cost-Reducing Innovation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(3), pages 377-397, 07.
- Maskus, Keith E. & Yongmin Chen, 2000.
"Vertical price control and parallel imports - theory and evidence,"
Policy Research Working Paper Series
2461, The World Bank.
- Keith E. Maskus & Yongmin Chen, 2004. "Vertical Price Control and Parallel Imports: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 551-570, 09.
- Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
- Valletti, Tommaso M., 2006. "Differential pricing, parallel trade, and the incentive to invest," Journal of International Economics, Elsevier, vol. 70(1), pages 314-324, September.
- Jung Hur & Yohanes E. Riyanto, 2006. "Tariff policy and exhaustion of intellectual property rights in the presence of parallel imports," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 549-568, July.
- Tommaso Valletti & Stefan Szymanski, 2006.
"Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis,"
CEIS Research Paper
75, Tor Vergata University, CEIS.
- Szymanski, Stefan & Valletti, Tommaso, 2005. "Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis," CEPR Discussion Papers 5022, C.E.P.R. Discussion Papers.
- Li, Changying & Maskus, Keith E., 2006. "The impact of parallel imports on investments in cost-reducing research and development," Journal of International Economics, Elsevier, vol. 68(2), pages 443-455, March.
- Zigic, Kresimir, 1998. "Intellectual property rights violations and spillovers in North-South trade," European Economic Review, Elsevier, vol. 42(9), pages 1779-1799, November.
When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2010.40. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah)
If references are entirely missing, you can add them using this form.