IDEAS home Printed from https://ideas.repec.org/p/fip/fedlwp/101980.html

Technology, Geopolitics, and Trade

Author

Listed:
  • Leo C.H. Lam

  • Ana Maria Santacreu

Abstract

We study how geopolitical fragmentation shapes cross-border technology licensing and innovation incentives. We show that bilateral royalty flows vary with geopolitical distance differently from goods trade, and that this relationship depends on intellectual property enforcement. To interpret these facts, we develop a growth-trade model in which geopolitical risk weakens licensing enforceability when intellectual property rights are poorly protected. Royalty payments reflect both technology adoption and licensing prices: weaker enforcement can reduce diffusion while inducing firms to reprice contracts. Reduced market size lowers returns to frontier technologies, whereas repricing can redirect innovation toward the technological leader, generating asymmetric welfare effects.

Suggested Citation

  • Leo C.H. Lam & Ana Maria Santacreu, 2025. "Technology, Geopolitics, and Trade," Working Papers 2025-029, Federal Reserve Bank of St. Louis, revised 09 Jul 2026.
    • Handle: RePEc:fip:fedlwp:101980
    DOI: 10.20955/wp.2025.029
    as

    Download full text from publisher

    File URL: https://doi.org/10.20955/wp.2025.029
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.20955/wp.2025.029?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Thomas J. Holmes & Ellen R. McGrattan & Edward C. Prescott, 2015. "Quid Pro Quo: Technology Capital Transfers for Market Access in China," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(3), pages 1154-1193.
    2. Lee G. Branstetter & Raymond Fisman & C. Fritz Foley, 2006. "Do Stronger Intellectual Property Rights Increase International Technology Transfer? Empirical Evidence from U. S. Firm-Level Panel Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(1), pages 321-349.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mandelman, Federico S. & Waddle, Andrea, 2020. "Intellectual property, tariffs, and international trade dynamics," Journal of Monetary Economics, Elsevier, vol. 109(C), pages 86-103.
    2. Krammer, Sorin M.S., 2015. "Do good institutions enhance the effect of technological spillovers on productivity? Comparative evidence from developed and transition economies," Technological Forecasting and Social Change, Elsevier, vol. 94(C), pages 133-154.
    3. Ana Maria Santacreu, 2021. "Dynamic Gains from Trade Agreements with Intellectual Property Provisions," Working Papers 2021-010, Federal Reserve Bank of St. Louis, revised Nov 2023.
    4. Ana Maria Santacreu, 2019. "International Technology Licensing, Intellectual Property Rights, and Tax Havens," Working Papers 2019-031, Federal Reserve Bank of St. Louis, revised 08 Sep 2023.
    5. Nikolas J. Zolas, 2014. "International Patenting Strategies With Heterogeneous Firms," Working Papers 14-28, Center for Economic Studies, U.S. Census Bureau.
    6. Smimou, K. & Abrokwah, M. & Drougas, A., 2025. "Corporate investment decisions and related commodities: International evidence from energy and mining industries," Energy Economics, Elsevier, vol. 149(C).
    7. Agarwal, Natasha & Milner, Chris & Riaño, Alejandro, 2014. "Credit constraints and spillovers from foreign firms in China," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 261-275.
    8. Lin, Jenny X. & Lincoln, William F., 2017. "Pirate's treasure," Journal of International Economics, Elsevier, vol. 109(C), pages 235-245.
    9. Liang, Jing & Qiu, Larry D. & Xiao, Junji, 2026. "Technology spillovers from Sino-foreign auto joint ventures to indigenous brands," International Journal of Industrial Organization, Elsevier, vol. 104(C).
    10. Xiao Ma & Yiran Zhang, 2025. "How do Multinationals Impact China's Technology? The Role of Quid Pro Quo Policy and Technology Spillovers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 66(5), pages 1933-1956, December.
    11. Joshua Aizenman, 2015. "Internationalization of the RMB, Capital Market Openness and Financial Reforms in China," Pacific Economic Review, Wiley Blackwell, vol. 20(3), pages 444-460, August.
    12. Auriol, Emmanuelle & Biancini, Sara & Paillacar, Rodrigo, 2023. "Intellectual property rights protection and trade: An empirical analysis," World Development, Elsevier, vol. 162(C).
    13. Lin, Chen & Lin, Ping & Song, Frank, 2010. "Property rights protection and corporate R&D: Evidence from China," Journal of Development Economics, Elsevier, vol. 93(1), pages 49-62, September.
    14. Keller, Wolfgang, 2020. "Comments on Mandelman and Waddle's “Intellectual property, tariffs, and international trade dynamics”," Journal of Monetary Economics, Elsevier, vol. 109(C), pages 104-106.
    15. C. Fritz Foley, 2006. "Comment on "Measuring Payments for the Supply and Use of Intellectual Property"," NBER Chapters, in: International Trade in Services and Intangibles in the Era of Globalization, pages 171-174, National Bureau of Economic Research, Inc.
    16. Ming Liu & Sumner LaCroix, 2011. "The Impact of Stronger Property Rights in Pharmaceuticals on Innovation in Developed and Developing Countries," Working Papers 201116, University of Hawaii at Manoa, Department of Economics.
    17. Patrice Cassagnard & Pierre Regibeau & Mamadou Thiam, 2026. "Collective Loss and Private Gain: Deciphering Boeing and Airbus’ Opposing Flight Plans in China," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 68(1), pages 1-14, January.
    18. Kamal Saggi & Difei Geng, 2014. "The nature of innovative activity and the protection of intellectual property: a post TRIPS perspective from Asia," Vanderbilt University Department of Economics Working Papers 14-00003, Vanderbilt University Department of Economics.
    19. Kong, Dongmin & Zhang, Bohui & Zhang, Jian, 2022. "Higher education and corporate innovation," Journal of Corporate Finance, Elsevier, vol. 72(C).
    20. Heather Berry, 2017. "Managing valuable knowledge in weak IP protection countries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(7), pages 787-807, September.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:101980. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Scott St. Louis (email available below). General contact details of provider: https://edirc.repec.org/data/frbslus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.