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Intellectual property rights, product complexity and the organization of multinational firms

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  • Alireza Naghavi
  • Julia Spies
  • Farid Toubal
Abstract
This paper studies how the intellectual property right (IPR) regime in destination countries influences the decision of firms between procurement from related parties and from independent suppliers while the latter may involve technology sharing or not. Using firm‐level data on the mode choice for each transaction and a new product complexity measure, results confirm that firms are generally reluctant to source complex goods from outside firm boundaries. However, when technology is shared, IPRs promote outsourcing of more complex goods whereas without technology sharing, IPRs promote outsourcing of less complex products that are prone to reverse engineering and simpler to imitate. Droits de propriété intellectuelle, complexité du produit, et organisation des entreprises plurinationales. Ce mémoire étudie comment le régime des droits de propriété intellectuelle (DPI) dans les pays de destination influence les décisions des entreprises entre s’approvisionner auprès de groupes qui lui sont reliés ou auprès de groupes indépendants – dans le cas où il se peut qu’un partage de la technologie s’impose ou non si la transaction se fait avec des groupes indépendants. Au moyen de données au niveau de l’entreprise sur le type de choix pour chaque transaction, et d’une nouvelle mesure de la complexité du produit, les résultats montrent que les entreprises sont généralement réticentes à s’approvisionner en biens complexes auprès d’unités qui se situent au‐delà des frontières de l’entreprise. Cependant quand la technologie est partagée, les DPI promeuvent la sous‐traitance de biens relativement plus complexes, alors que quand la technologie n’est pas partagée, les DPI promeuvent la sous‐traitance de biens relativement moins complexes qui se prêtent mieux à une réingénierie à rebours et sont plus simples à imiter.

Suggested Citation

  • Alireza Naghavi & Julia Spies & Farid Toubal, 2015. "Intellectual property rights, product complexity and the organization of multinational firms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(3), pages 881-902, August.
    • Handle: RePEc:wly:canjec:v:48:y:2015:i:3:p:881-902
    DOI: 10.1111/caje.12161
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    Cited by:

    1. Alireza Naghavi & Shin-Kun Peng & Yingyi Tsai, 2017. "Relationship-specific Investments and Intellectual Property Rights Enforcement with Heterogeneous Suppliers," Review of International Economics, Wiley Blackwell, vol. 25(3), pages 626-648, August.
    2. Massimiliano Bratti & Giulia Felice, 2012. "Buyer-Supplier Relationships, Internationalization and Product Innovation," Development Working Papers 327, Centro Studi Luca d'Agliano, University of Milano, revised 13 Nov 2012.
    3. Claudia Canals & Michael A. Klein & Fuat Şener, 2023. "Intellectual property‐related preferential trade agreements and US offshoring to developing countries," Review of International Economics, Wiley Blackwell, vol. 31(4), pages 1442-1475, September.
    4. Stefano Bolatto & Alireza Naghavi & Gianmarco Ottaviano & Katja Zajc Kejžar, 2023. "Intellectual property and the organization of the global value chain," Economica, London School of Economics and Political Science, vol. 90(359), pages 707-745, July.
    5. Biancini, Sara & Bombarda, Pamela, 2021. "Intellectual property rights, multinational firms and technology transfers," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 191-210.
    6. Olena Ivus & Walter G. Park, 2022. "All rights reserved: Copyright protection and multinational knowledge transfers," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1064-1091, July.
    7. Zachary Cohle, 2021. "Innovative R&D offshoring in North–South trade: Theory and evidence," The World Economy, Wiley Blackwell, vol. 44(4), pages 904-929, April.
    8. Verena Nowak & Christian Schwarz & Jens Suedekum, 2012. "On the Organizational Structure of Multinational Firms - Which Sourcing Mode for which Input?," CESifo Working Paper Series 3823, CESifo.
    9. Kohler, Wilhelm & Smolka, Marcel, 2021. "Productivity and firm boundaries," European Economic Review, Elsevier, vol. 135(C).
    10. Bratti, Massimiliano & Felice, Giulia, 2018. "Product innovation by supplying domestic and foreign markets," International Journal of Industrial Organization, Elsevier, vol. 60(C), pages 126-178.
    11. Fernandez Donoso, Jose, 2017. "A simple index of innovation with complexity," Journal of Informetrics, Elsevier, vol. 11(1), pages 1-17.
    12. Olena Ivus & Walter G Park & Kamal Saggi, 2023. "Patent protection and the composition of multinational activity: Evidence from US multinational firms," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 14, pages 317-345, World Scientific Publishing Co. Pte. Ltd..
    13. José Fernández Donoso, 2015. "Foreign IPR, Trade and Innovation: Does complexity matter?," Serie Working Papers 23, Universidad del Desarrollo, School of Business and Economics.
    14. Comi, Simona & Grasseni, Mara & Resmini, Laura, 2021. "Can judicial efficiency improve territorial attractiveness to FDI? The Italian experience," European Journal of Political Economy, Elsevier, vol. 70(C).
    15. Menezes, Mozart B.C. & Ruiz-Hernández, Diego & Chen, Yen-Tsang, 2021. "On the validity and practical relevance of a measure for structural complexity," International Journal of Production Economics, Elsevier, vol. 240(C).
    16. Klein, Michael A., 2023. "Trade secret protection, multinational firms and international trade," International Economics, Elsevier, vol. 173(C), pages 325-342.
    17. lv, Kangjuan & Pan, Minjie & Huang, Li & Song, Daqiang & Qian, Xinlei, 2023. "Can intellectual property rights protection reduce air pollution? A quasi-natural experiment from China," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 210-222.
    18. Olena Ivus & Walter Park & Kamal Saggi, 2015. "Patent Protection and the Industrial Composition of Multinational Activity: Evidence from U.S. Multinational Firms," Vanderbilt University Department of Economics Working Papers 15-00014, Vanderbilt University Department of Economics.

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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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