ForeignDirectInvestment,TechnologyTransferand.pptVIP

Foreign Direct Investment, Technology Transfer and Protection of Intellectual Property Rights Beata Smarzynska Javorcik The World Bank What does theory tell us? Dunning’s OLI paradigm Ownership advantages Location advantages Internalization advantages Ownership advantages Large share of world RD effort is conducted by MNCs, mostly in home countries MNCs spend large amounts on advertising MNCs possess valuable brand names Coca-Cola (valued at 70 billion dollars) Microsoft (65 billion) IBM (52 billion) = MNCs want to protect knowledge/technology/ brand names Location advantages Market size (population size, income per capita) Factor costs (labor costs, natural resources) Business climate protection of property rights, including IPRs corruption taxation labor and environmental standards = IPR protection as ONE of the many elements of business climate Internalization advantages Determine choice between FDI and licensing Stronger IPR protection = higher likelihood of licensing rather than FDI Empirical evidence on the link between IPRs and FDI Volume Lee and Mansfield (1996), Smith (2001) positive correlation between the strength of IPR protection on the volume of US FDI But no significant results in Ferrantino (1993) and Primo Braga and Fink (2000) = mixed evidence on IPRs and volume of FDI IPR and composition of FDI Some sectors are more reliant on formal IPR protection than others For instance, unauthorized used of technology is less likely in sectors requiring high amount of investment, such as automobiles Weak IPR protection deters FDI inflows into IPR sensitive sectors (Javorcik, forthcoming) drugs, cosmetics, healthcare products chemicals machinery and equipment electrical equipment = IPR protection matters for foreign investors in certain sectors IPRs and purpose of FDI projects Firm survey (Mansfield 1994) – the importance of IPR protection depends on the nature of the investment project sales and distribution - 20% of investors consi