Conducting R&D in Countries With Weak Intellectual Property Rights Protection

Multinational enterprises (MNEs) are increasingly conducting research and development (R&D) in countries such as China and India, where intellectual property rights (IPR) protection is still far from adequate. This paper examines this seemingly puzzling situation. I argue that weak IPR leads to low returns to innovation and underutilization of innovative talents; MNEs that possess alternative mechanisms for protecting their intellectual properties will therefore find it attractive to conduct R&D at those locations. A theoretical framework is developed to capture the interaction between firm strategy and the institutional environment. The empirical analysis on a sample of 1,567 U.S.-headquartered innovating firms finds results consistent with the hypotheses that (i) technologies developed in countries with weak IPR protection are used more internally, and (ii) technologies developed by firms with R&D in weak IPR countries show stronger internal linkages. The results suggest that firms may use internal organizations to substitute for inadequate external institutions. By doing so, they are able to take advantage of the arbitrage opportunities presented by the institutional gap across countries

Offshore Outsourcing, Contractual R&D and Intellectual Property in Developing Countries

This paper examines the role of intellectual property in developing countries in offshore outsourcing of R&D. We find that strengthened intellectual property protection in developing countries provides incentive for firms, both multinational and local, to specialize in undertaking an R&D activity in which it has competitive advantage (the specialization effect). It also facilitates the process for local firms to switch from imitators to potential innovators (the switching effect). We demonstrate that the multinational firm's strategic behavior on IPR enforcement can be used as an effective instrument to subsidize contractual research and development in developing countries (the subsidizing effect). We further illustrate how a policy mix of IPR and FDI subsidy in developing countries affects R&D activities adding an offshore R&D subsidiary as an additional organizational form.Intellectual Property Rights; Contractual R&D; R&D Chain

The role of patent protection in (clean/green) technology transfer.

Global climate change mitigation will require the development and diffusion of a large number and variety of new technologies. How will patent protection affect this process? In this paper we first review the evidence on the role of patents for innovation and international technology transfer in general. The literature suggests that patent protection in a host country encourages technology transfer to that country but that its impact on innovation and development is much more ambiguous. We then discuss the implications of these findings and other technology-specific evidence for the diffusion of climate change-related technologies. We conclude that the “double externality” problem, that is the presence of both environmental and knowledge externalities, implies that IP may not be the ideal and cannot be the only policy instrument to encourage innovation in this area and that the range and variety of green technologies as well as the need for local adaptation of technologies means that patent protection may be neither available nor useful in some settings.Climate change; intellectual property; innovation; technology transfer

Impact of Intellectual Property Rights Reforms on the Diffusion of Knowledge through FDI

This paper examines the impact of intellectual property rights (IPR) reforms on the technology flows between the U.S. and countries where U.S. multinationals have established affiliates. We use patent citations as a proxy for knowledge spillovers to examine whether the diffusion of new technology between the host countries and the U.S. is accelerated by the reforms. We test the hypothesis that strengthening patent protection facilitates knowledge flows (in the form of patent citations) between U.S. multinationals and their subsidiaries in the reforming countries and between other U.S. firms and reforming countries domestic firms. Our results suggest that the reforms favor innovative efforts of domestic firms in the reforming countries rather than U.S. affiliates efforts. In other words, reforms mediate the technology flows from the U.S. to the reforming countries.intellectual property rights, patents, spillovers, R&D, FDI

Intellectual property related development aid: is supply aligned with demand?

We assessed to what extent developed country development aid programmes are likely to have interacted with, and potentially contributed to the promotion of country-appropriate sustainable changes in IP strategies and technological capacities over the period 2005-10. This was done primarily on the basis of an imputed impact assessments of four emerging and transition economies; namely Brazil, India, Poland and Thailand. Through an analysis of various measures of the domestic economic, technological and Intellectual Property context, we studied to what extent the supply of IP-related development aid provided between 2005 and 2010 responded to the likely needs of recipient countries. While the data shows that technical and financial assistance in this area could be of great use, and there is clearly a need for well-targeted IP TA and much scope for useful IP TA interventions, there seemed to only be a partial alignment between country needs and the direction of IP TA. On the whole, most IP-related development aid and technical assistance ended to focus on similar areas in each country, regardless of the development context. In Brazil and India’s case, training on IP administration may have influenced increased efficiency (from a low base) at the INPI and IP India, while the substantial EU support to raise SME IP awareness in Poland is likely to have had some significant impacts. In India, sustained development aid in this area likely influenced legislation on plant variety protection, as did WIPO TA on legislative reforms in Thailand. In all cases, the substantial US (and to a more limited extent EC) focus on development aid directed towards enforcement coincided with improvements in this area, though the political and economic pressures by both providers, and especially the US Section 301 System probably dwarfed the impact of this type of aid. Further, the typology and direction of IP related development aid reflects the comparative advantage of IP TA providers, as well as political and diplomatic interests, trade priorities and colonial ties, among many other things. As such, it is important to understand that IP TA is also highly political – a fact often concealed in the emphasis on its “technical” nature.Intellectual Property and development, aid and technical assistance technological capacities in Brazil, India, Poland, Thailand, taxonomy of development, funding flows Intellectual Property and development, aid and technical assistance technological capacities in Brazil, India, Poland, Thailand, taxonomy of development, funding flows Intellectual Property and development, aid and technical assistance, technological capacities in Brazil, India, Poland, Thailand, taxonomy of development, funding flows Intellectual Property and development, aid and technical assistance technological capacities in Brazil, India, Poland, Thailand, taxonomy of development, funding flows

Innovation in China: the rise of Chinese inventors in the production of knowledge

In 2010 China was the world's fourth largest filer of patent applications. This followed a decade of unprecedented increases in investment in skills and Research and Development. If current trends continue China could rank first in the very near future. We provide evidence that the growth in Chinese patenting activity has been accompanied by a growth in Chinese inventors creating technologies that are near to the science base. Part of the success of China has been to attract the investment of foreign multinationals. This is also true for a number of other Emerging Economies. Europe's largest multinational firms increasingly file patent applications that are based on inventor activities located in emerging economies, often working alongside inventors from the firm's home country.China; innovation; offshoring; patents.

Intangible resources, agglomeration effect of FDI intensity, and firm performance: Evidence from Chinese semiconductor firms

This study analyzes the impact of intangible resources on firm performance in an emerging economy context. Intangible resources are considered essential to firms? competitive advantage; however, we argue that firms? intangible resources can be negatively related with performance in emerging economies, due to their weak intellectual property rights protection. Furthermore, we incorporate the resource-based view and geographical agglomeration perspective to propose that geographical locations with dense foreign direct investment can affect the appropriability of intangible resources, thereby moderating the relationship between intangible resources and firm performance. We find empirical evidence to support our argument by examining 70 semiconductor firms in China from 1999 to 2006 period.intangible resources, intellectual property, agglomeration, foreign direct investment, emerging economy

R&D Productivity and Intellectual Property Rights Protection Regimes

We study firms' preferences towards intellectual property rights (IPR) regimes in a North-South context, using a simple duopoly model where a 'North' and a 'South' firm compete in a third market. Unlike other contributions in this field, we explicitly introduce the South's capability to undertake cost-reducing R&D, but maintain the South's inferiority in utilizing and managing its R&D. In contrast to traditional results, we show that the North may encourage lax IPR protection provided that its South rival's R&D productivity is sufficiently high, while the South may find it in its best interest to strictly enforce IPR protection if its R&D productivity is low. In this sense, our results do not support the idea of universal or uniform IPR protection regime. In addition, we find that if firms are allowed to agree on any level of information exchange when IPR protection is strictly enforced, such an exchange can always be established as long as each firm is ensured that what it gets to utilize in return is greater than a half of what it gives to its rival.intellectural property rights (IPRs), cost-reducing R&D, R&D productivity, information exchange.

Innovation Theories: Relevance and Implications for Developing Country Innovation

Innovation is at the basis of economic development and as such, it is instrumental for developing countries. We review the literature on innovation from the perspectives of four select branches of economics to build a conceptual framework of innovation applicable to developing countries. The conceptual framework includes insights from the surveyed literature and identifies areas of further research. Finally, we conclude with policy recommendations for innovation policies in developing countries highlighting the fact that intellectual property protection is not likely to be at the basis of innovation in these countries.Innovation, Development, Absorptive Capacity