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Intellectual Property Rights Protection, Complexity and Multinational Firms

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  • Yang, Zhenzeng

Abstract

This paper examines theoretically the impact of host intellectual property rights (IPR) protection and complexity on MNEs' investment decision to the South in order to explain why large amount of foreign direct investment (FDI) flows to low IPR protecting China and other emerging economies. There are two key assumptions, imitation cost are positively related to complexity and imitation cost is higher when imitating a product designed only for foreign market than those for host market. In the model, a strengthening of IPR protection in the South raises an MNE's profit and stimulates inward FDI and licensing simultaneously, and stronger IPR protection will also induce more higher complexity production transfered to the South. Furthermore, as cost-oriented FDI is less sensitive to host IPR protection, developing host countries with low IPR protection can attract relatively more cost-oriented FDI. The model implies that strengthening of IPR protection can help emerging economies attract more complex and market-oriented FDI.

Suggested Citation

  • Yang, Zhenzeng, 2013. "Intellectual Property Rights Protection, Complexity and Multinational Firms," MPRA Paper 46734, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:46734
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    File URL: https://mpra.ub.uni-muenchen.de/47237/8/MPRA_paper_47237.pdf
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    References listed on IDEAS

    as
    1. Smarzynska Javorcik, Beata, 2004. "The composition of foreign direct investment and protection of intellectual property rights: Evidence from transition economies," European Economic Review, Elsevier, vol. 48(1), pages 39-62, February.
    2. Branstetter, Lee & Fisman, Ray & Foley, C. Fritz & Saggi, Kamal, 2011. "Does intellectual property rights reform spur industrial development?," Journal of International Economics, Elsevier, vol. 83(1), pages 27-36, January.
    3. Helpman, Elhanan, 1993. "Innovation, Imitation, and Intellectual Property Rights," Econometrica, Econometric Society, vol. 61(6), pages 1247-1280, November.
    4. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    5. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
    6. Grossman, Gene M & Helpman, Elhanan, 1991. "Endogenous Product Cycles," Economic Journal, Royal Economic Society, vol. 101(408), pages 1214-1229, September.
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    9. Khoury, Theodore A. & Peng, Mike W., 2011. "Does institutional reform of intellectual property rights lead to more inbound FDI? Evidence from Latin America and the Caribbean," Journal of World Business, Elsevier, vol. 46(3), pages 337-345, July.
    10. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-918, December.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Intellectual Property Rights; Licensing; Imitation; Multinational Enterprise; Foreign Direct Investment;

    JEL classification:

    • 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
    • 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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