International technology transfer and domestic patent policy: An empirical analysis of Indian industry

Abstract

Firms in the developing countries transfer technology predominantly produced in the developed economies through different modes namely market-mediated channels including trade in goods and services, foreign direct investment, licensing or non-market channels like employees turnover. Multitude of host country’s factors (locational and policy related) influences the mode-choice decision of multinational enterprises among exports, FDI and licensing to work in a host country. Among these factors, provision for the protection of patent rights reduces transactions costs that lead to externalization in form of arm’s-length licensing against FDI. India has made patent policy changes during the post globalization period to comply with Trade Related Intellectual Property Rights Agreement. Accordingly, this study attempts to find the influence of the patent policy changes on licensing strategy of the Indian manufacturing industry. This paper is based on panel data of 51 industries for period 1989-90 to 2009-10. We have checked each panel data regression for the presence of heteroscedasticity, contemporaneous correlation and serial correlation. In case of the presence of heteroscedasticity and contemporaneous correlation the results are based on heteroskedastic panels corrected standard errors and correlated panels corrected standard errors. As the modeling is based on macro-panel data having large number of industries (N) and time period (T) each data series is checked for unit-root using panel data unit-root tests. The study uses Fisher type test. We estimate the model after controlling for the general policy changes in India following the liberalization, privatization and globalization of the economy. We are able to establish a substitutable relationship between licensing from international market and in-house R&D. The removal of licensing regulations of different industries has a positive influence on the firm’s decision to license. We also find a complementary relationship between capital goods import and licensing. Thus, policy makers should allow for easy capital imports to facilitate technology transfers. The study indicates that patent policy influences technology transfer to India albeit negatively and limited to patent-sensitive industries confirming the monopoly power effect for such industries. Thus, policy makers have to use regulatory approach to facilitate transfers instead of merely relying on the market approach. Moreover, with respect to patent-sensitive industries there is need to closely watch the licensing behavior of the technology owners for anti-competitive practices.

Foreign Technology Absorption in Sub-Saharan Africa: A Long-Term Analysis of the Nature and Stability of Relationships

“…Permitting the import of technology enhances effectiveness of the economy (Pack & Paxons, 1999). Especially important for the process are the imports of capital goods (Sharma & Ambrammal, 2015). This was supported by the recent research on imports of capital goods from China.…”

Does capital drain reduce total factor productivity growth in developing countries?

“…Moreover, TFP growth and international technology transfer cannot be separated from each other. The process of dissemination of commercial technology across economies is vitally important for TFP growth (Sharma and Ambrammal, 2015) since foreign sources of technology constitute approximately 90% or more of domestic productivity growth (Keller, 2009). Despite a large number of empirical studies associated with FDI in terms of technology transfer, these spillover effects have been examined associated mostly with inward variables.…”