A Quantitative Study of the Effect of Foreign Investment on Nonresident Patenting in Developing Countries, 1980-2010

Abstract

This study examines whether foreign investment is a significant predictor of nonresident patent counts in developing countries over time. Unbalanced panel data are observed for 64 developing countries over a 31 year time period from 1980 to 2010 to test a hypothesis stating that countries with higher levels of inward accumulated foreign direct investment (FDI) stocks have higher nonresident patent counts, controlling for other explanatory factors such as population size, level of economic development, education rates, government expenditures, levels of domestic investment, and resident patent counts. Predicted counts of nonresident patents are estimated with Random Effects Negative Binomial (RENB) regression to model the effects of different independent variables on nonresident patenting in each country. Results confirm this study’s hypothesis by showing a significant and robust positive effect for accumulated FDI stocks on nonresident patent counts, while controlling for the effects of other variables over time in the sample of 64 developing countries included in this analysis. This study advances a sociological approach to theories of intellectual property and posits the accumulation of FDI stock as critical to predicting patterns of ownership of intangible capital wealth in developing countries over time. It remains to be seen if developed country FDI influences nonresident patent activities in similar or different ways to developing countries. Future studies may compare between groups of developed and developing countries to determine if nonresident and resident patent activities evolve in the same fashion. Finally, future research may also focus on the nuances between different types of intellectual property (patents, copyrights, trademarks, etc.) in order to more accurately predict each class of intangible capital wealth.