Modelling the impact of intellectual property protection and spillovers on attracting foreign direct investment

Abstract

Previous studies yield ambiguous results from using country-level indices of intellectual property rights (I.P.R.) protections to test their relation to foreign direct investment (F.D.I.). This study develops a simple model featuring vertically linked stages of production to show that country-level I.P.R. indices might cause the ambiguity by ignoring differences in I.P.R. protection strength across industries. We demonstrate that industry-level I.P.R. indices resolve ambiguity over the empirical nexus between I.P.R. protections and F.D.I.

Do intellectual property rights promote foreign direct investment inflows and technological exports in developing and developed countries?

“…Awokuse and Yin (2010) identified a positive relationship between INPR and FDI in a study of China; Blyde and Acea (2002) found the same result in a study of the Organisation for Economic Co-operation and Development (OECD) countries after considering the moderating effects of infrastructure and human capital levels. Such studies indicate that INPR affects the industry and composition of FDI; however, the analysis has tended to focus on foreign investment evidence rather than the development of countries or their technical capabilities classified by industry (Chen, 2021a). Finally, Park and Lippoldt (2003) found a positive effect between INPR and outward FDI due to the organisation of INPR reforms.…”