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Innovation and FDI: Does the target of intellectual property rights protection matter?

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  • Chen, Hung-Ju
Abstract
This paper develops a North-South product-cycle model with innovation and foreign direct investment (FDI) to analyze the influences from strengthening intellectual property rights (IPR) protection. Innovation occurs in the North while imitation happens in the South. Southern firms can imitate either goods produced in the North or goods produced by multinationals in the South. We find that if the target of strengthening IPR protection is Northern-produced goods, then such a policy change reduces the innovation rate and raises the North-South relative wage in the long run. However, the effects on the long-run innovation rate and the North-South relative wage reverse if its target is Southern-produced goods by multinationals. As for the pattern of production, strengthening IPR protection raises the long-run extents of FDI and Southern production imitating goods produced by multinationals while reducing the long-run extents of Northern production and Southern production imitating goods produced in the North, regardless of the target of stronger IPR protection. In addition to examining the long-run effects of strengthening IPR protection, we also analyze its effects during the transitional dynamics. The quantitative analysis indicates that the two strengthening-IPR-protection policies cause welfare losses for both Northern and Southern consumers if we consider the accumulated effects during the transitional dynamics.

Suggested Citation

  • Chen, Hung-Ju, 2021. "Innovation and FDI: Does the target of intellectual property rights protection matter?," Journal of International Money and Finance, Elsevier, vol. 118(C).
    • Handle: RePEc:eee:jimfin:v:118:y:2021:i:c:s0261560621001091
    DOI: 10.1016/j.jimonfin.2021.102458
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    References listed on IDEAS

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    Cited by:

    1. Awoa Awoa, Paul & Ngouma Yana, Alexandre Ghislain & Okah Efogo, Françoise & Atangana Ondoa, Henri, 2024. "Africa's resource curse: The key role of property rights," Resources Policy, Elsevier, vol. 91(C).
    2. Yihao Cao & Ehsan Elahi & Zainab Khalid & Ping Li & Pengsheng Sun, 2023. "How Do Intellectual Property Rights Affect Green Technological Innovation? Empirical Evidence from China," Sustainability, MDPI, vol. 15(10), pages 1-17, May.
    3. Xinlei Qian & Minghao Sun & Minjie Pan & Weiyong Zou & Guoxiang Li, 2023. "Intellectual property rights policy and foreign direct investment: A quasi‐natural experiment from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2378-2392, June.

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    More about this item

    Keywords

    FDI; Imitation; Innovation; IPR; R&D;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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