“Intellectual Property Protection and the Industrial Composition of Multinational Activity” by Olena Ivus
The American University,
In a North-South model with endogenous FDI, we examine the impact of Southern IPR protection on the mode and industry composition of international technology transfer. A novel feature of the model is that, due to technological reasons, industries differ with respect to their susceptibility to imitation. In equilibrium, licensing occurs in industries where the risk of imitation is low and FDI where it is of intermediate magnitude. Stronger IPRs in the South (i) alter the industrial composition of multinational activity towards licensing at the expense of FDI, (ii) reduce local imitation, (iii) increase licensing and, to a lesser extent, FDI.