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Intellectual Property Rights and Foreign Direct Investment: A Welfare Analysis

Author

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  • Hitoshi Tanaka

    () (Faculty of Economics, Hokkai-Gakuen University)

  • Tatsuro Iwaisako

    () (Graduate School of Economics, Osaka University)

Abstract

This paper examines how intellectual property rights (IPR) protection affects innovation and foreign direct investment (FDI) using a North-South quality-ladder model incorporat- ing the exogenous and costless imitation of technology and subsidy policies for both R&D and FDI. We show that for the interior steady state to be stable, either R&D or FDI sub- sidy rates must be positive. Our findings also indicate that strengthening IPR protection promotes both innovation and FDI. Moreover, a strengthening of IPR protection can also improve welfare if the initial IPR protection in the South is weak and the R&D subsidy rate is not too high.

Suggested Citation

  • Hitoshi Tanaka & Tatsuro Iwaisako, 2013. "Intellectual Property Rights and Foreign Direct Investment: A Welfare Analysis," Discussion Papers in Economics and Business 13-15-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Nov 2013.
  • Handle: RePEc:osk:wpaper:1315r
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    References listed on IDEAS

    as
    1. Tanaka, Hitoshi & Iwaisako, Tatsuro & Futagami, Koichi, 2007. "Dynamic analysis of innovation and international transfer of technology through licensing," Journal of International Economics, Elsevier, vol. 73(1), pages 189-212, September.
    2. Gene M. Grossman & Edwin L.-C. Lai, 2004. "International Protection of Intellectual Property," American Economic Review, American Economic Association, vol. 94(5), pages 1635-1653, December.
    3. Wolf-Heimo Grieben, 2005. "A Schumpeterian North-South Growth Model of Trade and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 106-128, February.
    4. Iwaisako, Tatsuro & Tanaka, Hitoshi & Futagami, Koichi, 2011. "A welfare analysis of global patent protection in a model with endogenous innovation and foreign direct investment," European Economic Review, Elsevier, vol. 55(8), pages 1137-1151.
    5. Helpman, Elhanan, 1993. "Innovation, Imitation, and Intellectual Property Rights," Econometrica, Econometric Society, vol. 61(6), pages 1247-1280, November.
    6. Angus C. Chu & Yuichi Furukawa, 2013. "Patentability and Knowledge Spillovers of Basic R&D," Southern Economic Journal, Southern Economic Association, vol. 79(4), pages 928-945, April.
    7. Grieben, Wolf-Heimo & Sener, Fuat, 2009. "Globalization, rent protection institutions, and going alone in freeing trade," European Economic Review, Elsevier, vol. 53(8), pages 1042-1065, November.
    8. Ted O'Donoghue & Josef Zweimueller, 2004. "Patents in a Model of Endogenous Growth," Journal of Economic Growth, Springer, vol. 9(1), pages 81-123, March.
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    Citations

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    Cited by:

    1. Manuel A. Gómez & Tiago Neves Sequeira, 2016. "R&D Subsidies and Foreign Direct Investment," Open Economies Review, Springer, vol. 27(4), pages 769-793, September.
    2. Chu, Angus C. & Cozzi, Guido & Furukawa, Yuichi, 2013. "A Schumpeterian Analysis of Monetary Policy, Innovation and North-South Technology Transfer," MPRA Paper 49533, University Library of Munich, Germany.
    3. repec:eee:jeborg:v:151:y:2018:i:c:p:171-190 is not listed on IDEAS
    4. Kamal Saggi, 2016. "Trade, Intellectual Property Rights, and the World Trade Organization," Vanderbilt University Department of Economics Working Papers 16-00014, Vanderbilt University Department of Economics.
    5. Iwaisako, Tatsuro, 2013. "Welfare effects of patent protection and productive public services: Why do developing countries prefer weaker patent protection?," Economics Letters, Elsevier, vol. 118(3), pages 478-481.
    6. Kiyoka Akimoto & Takaaki Morimoto, 2017. "Examination and Approval of New Products in an Endogenous Growth Model," Discussion Papers in Economics and Business 17-33, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    7. Tian, Xian-Liang, 2017. "Sector-specific IPR protection to overcome technology-skill mismatch in South? A simple model," Mathematical Social Sciences, Elsevier, vol. 85(C), pages 44-51.
    8. repec:bla:reviec:v:25:y:2017:i:5:p:1130-1154 is not listed on IDEAS
    9. Kazuyoshi Ohki, 2017. "International intellectual property rights protection and economic growth with costly transfer," Review of International Economics, Wiley Blackwell, vol. 25(5), pages 1130-1154, November.
    10. Suzuki, Keishun, 2014. "Southern Innovation and Foreign Direct Investment," MPRA Paper 57054, University Library of Munich, Germany.

    More about this item

    Keywords

    foreign direct investment; innovation; intellectual property rights protection;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • 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

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