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Intellectual Property Rights Protection and the Location of Research and Development Activities by Multinational Firms

  • Rene Belderbos
  • Kyoji Fukao
  • Hyeog Ug Kwon

We develop a model of the location of global R&D investments by multinational firms, where research investments increase the number of varieties of goods sold globally by the firm, and development activities reduce the cost of producing existing varieties in specific countries. Intellectual Property Rights (IPR) protection in a country enhances the efficiency of the firms' local research as well as the profitability local development efforts. We test predictions of the model on survey data on foreign and domestic R&D for 605 Japanese multinational firms with manufacturing activities in 42 foreign countries in 1996. We find the strength of IPR protection to have a positive impact both on development expenditures and research expenditures in a country, while both research and development expenditures are also sensitive to local wage costs. Research expenditures depend positively on technological opportunities in the industry and country, while development expenditures are positively affected by potential local demand for the firm's products.

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File URL: http://hi-stat.ier.hit-u.ac.jp/research/discussion/2006/pdf/D06-167.pdf
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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Hi-Stat Discussion Paper Series with number d06-167.

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Date of creation: Jun 2006
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Handle: RePEc:hst:hstdps:d06-167
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  1. James R. Hines, Jr., 1993. "No Place Like Home: Tax Incentives and the Location of R&D by American Multinationals," NBER Working Papers 4574, National Bureau of Economic Research, Inc.
  2. Kumar, Nagesh & Saqib, Mohammed, 1996. "Firm size, opportunities for adaptation and in-house R & D activity in developing countries: the case of Indian manufacturing," Research Policy, Elsevier, vol. 25(5), pages 713-722, August.
  3. Kumar, Nagesh, 1996. "Intellectual property protection, market orientation and location of overseas R&D activities by multinational enterprises," World Development, Elsevier, vol. 24(4), pages 673-688, April.
  4. Braga, Helson & Willmore, Larry, 1991. "Technological Imports and Technological Effort: An Analysis of Their Determinants in Brazilian Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 421-32, June.
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