Effect of the TRIPS‐Mandated Intellectual Property Rights on Foreign Direct Investment in Developing Countries: A Case Study of the Indian Pharmaceutical Industry

Abstract

The Agreement on Trade‐Related Aspects of Intellectual Property Rights is the most important as well as the most controversial instrument to date concerning intellectual property protection. What is not clear is the impact it will have on developing countries and whether it will actually meet its objective in the “… promotion of technological innovation and to the transfer and dissemination of technology …”. The proponents of a strong patent regime vehemently argue that strengthening patent protection will lead to greater technology transfer in developing countries, and consequently inflow of foreign direct investment (FDI) as it is the most important channel for technology transfer. This article takes the Indian pharmaceutical industry as an example to examine the above assertion, and argues that simply enhancing patent protection may not necessarily result in a corresponding increase in FDI in the Indian pharmaceutical sector. It shows that in addition to strong patent protection, there are equally or even more important factors that have a bearing on the inflow of FDI.