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Technology spillovers, intellectual property rights, and export-platform FDI

journal contribution
posted on 2018-04-06, 00:00 authored by A Ghosh, H Morita, Xuan NguyenXuan Nguyen
How do trade liberalization and changes in market size affect the strength of intellectual property rights (IPR) protection in Southern countries? We explore this question in an in- ternational oligopoly model in which a Northern firm has the option of export-platform FDI (EPF): that is, to set up an export platform in the South to serve not only the South- ern market but also other export markets. EPF allows the Northern firm to take advan- tage of low tariffs that often exist between the South and other export markets. However, with imperfect protection of IPR in the South, the Northern firm’s technological advantage is reduced under EPF as technology spills over, at least partially, to Southern firms. We show that when trade between the South and the export market becomes more liberal- ized, South government weakens its optimal IPR policy to improve welfare. The opposite is true when trade is liberalized between the North and the South, or between the North and the export market. The effect of an increase in the size of the Southern market criti- cally depends on whether the Northern firm chooses EPF over home production to increase its profit in the Southern market or in the export market. The robustness of our findings is explored in a variety of extensions including multiple export platforms, multilateral trade liberalization, and EPF by multiple Northern firms. Explicitly incorporating export markets and the possibility of EPF, this paper sheds new light on our understanding of the North–South conflict regarding IPR protection, a highly debated issue among member countries of the WTO.

History

Journal

Journal of economic behavior and organization

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

0167-2681

Language

eng

Notes

In press

Publication classification

C1 Refereed article in a scholarly journal

Copyright notice

2018, Elsevier B.V.