Patent protection and foreign R&D investment location choices: inventor mobility and policy convergence

Abstract

We suggest two boundary conditions for the positive role of patent protection in attracting inward foreign R&D investments. Patent protection is less effective in limiting the leakage of nonpatented knowledge through interfirm mobility of employees, and a gradual strengthening of patent protection worldwide diminishes its effect as countries get closer to the intellectual property rights (IPR) frontier. We provide evidence in an empirical analysis of 3393 multinational firms’ R&D location choices for 8015 greenfield R&D investments in 105 (potential) host countries, during 2003–2014. The relationship between R&D investment location choices and IPR protection is subject to declining marginal effects and negatively moderated by inventor mobility.