Intellectual property rights, imitation, and development. The effect on cross-border mergers and acquisitions

Abstract

In this paper, we analyze whether the recent global process of strengthening and harmonization of intellectual property rights (IPRs) affects decisions of cross-border mergers and acquisitions (M&As). We investigate if IPRs have a differential effect across sectors of different technology content and for countries of different development level. Also, we study how imitation abilities of target countries interact with the tightening of IPRs. Using data for the post-TRIPS period (1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010), we estimate an extended gravity model to study the bilateral number of M&As, including a measure of the strength of IPRs systems on target countries and a set of control variables usually considered as determinants of M&As. The estimation results verify the gravity structure for M&As and show that IPRs -and enforcement-influence decisions of cross-border M&As in all sectors regardless of their technological content. However, IPRs are more important in countries with high imitation abilities and in sectors of high-technology content. Furthermore, a strengthening of IPRs leads to a larger increase of M&As in developing countries than in developed countries. These results call the attention on the possible implications for least developed economies and challenge the adequacy of a globally harmonized IPRs systems.

Protectionism and Cross-Border Mergers and Acquisitions Undertaken by US Multinational Enterprises: The Moderating Role of Intellectual Property Rights Protection

“…IPR protection, as one of the most important aspects of a country's formal institutional framework (North, 1990), has been studied significantly in IB and management research (e.g., Ghauri & Rao, 2009;Khoury & Peng, 2011;Papageorgiadis & Sofka, 2020). Despite this research, the specific influences exerted by IPR protection on the number and frequency of CB M&A deals in a country are relatively underexplored (e.g., Alimov & Officer, 2017;Campi et al, 2019). IP assets tend to be a significant part of a target firm's valuation if a CB M&A is focused on accessing a specific technology, product, knowledge, or process competency (Buckley & Munjal, 2017).…”

The Impact of Overseas M&A on Performance Sensitivity of CEO Turnover: Evidence From Chinese Listed Companies

“…Yang and Hyland (2012) document that the imitation of emerging economies will affect the cross-border M&As and imitation behavior of multinational corporations, and the link between imitation and isomorphism (the force of mimetic isomorphism) is strengthened by environmental instability. Campi et al (2019) point out that the cross-border M&A decisions are also influenced by the process of strengthening and coordinating intellectual property rights globally. Besides, there are other factors affecting the M&A tendency of a company.…”

Impact of Intellectual Property Rights on Activity of Cross-Border Mergers and Acquisitions

“…They find that IPR and law enforcement have a positive influence on cross-border M&A in all sectors regardless of their technological content, but IPR is more important in high-technology sectors. In addition, the reinforcement of IPR stimulates a greater increase in M&A in emerging countries than in developed ones [1]. Same as Campi et al and Alimov and Officer, many researchers note that it is important to consider country characteristics when investigating cross-border M&A and FDI [1; 10].…”

“…It is important to note that signing the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1994 led to global diffusion and improvement of IPR systems. After that, even developed countries increased the level of IPR protection and emerging ones adopted new systems or adapted existing systems to the minimum standards demanded by TRIPS [1].…”

“…Thus, when entering foreign markets, acquirers are specifically concerned about intellectual property rights (IPR) protection in target countries. Intellectual property assets can be a significant part of the target's value, they affect the acquirers' decisions and can be a driving force behind both cross-border and domestic M&A deals [1].…”