Knowledge diffusion from FDI and Intellectual Property Rights

Roger Smeets and Albert de Vaal

No 168, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: We study the extent to which a country's strength of Intellectual Property Rights (IPR) protection mediates knowledge spillovers from Foreign Direct Investment (FDI). Following the opposing views in the IPR debate, we propose a negative effect of IPR strength on unintentional horizontal (intra-industry) knowledge diffusion. Using a unique firm-level dataset of large, publicly traded firms in 22 (mostly) developed countries, we find partial support for these expectations. Strong IPR indeed reduces horizontal knowledge diffusion, while it stimulates backward (to suppliers) knowledge diffusion. Somewhat unexpectedly however, we also find that forward (to customers) knowledge diffusion decreases with IPR strength. In general, and in line with earlier literature, the results regarding backward knowledge diffusion are most robust to changes in model specification. Our results contribute to the debate regarding the desirability of strengthening national IPR systems, and suggest that local firms might indeed benefit from this through their (backward) linkages with multinationals. Additionally, our results suggest that the moderating effect of IPR strength might partly explain the inconclusive results in the FDI knowledge diffusion literature.

JEL-codes: F23 O33 O34 (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-cse, nep-ipr, nep-pr~ and nep-knm
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:cpb:discus:168

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