Abstract
What is the impact of intellectual property rights (IPR) protection on foreign direct investment (FDI)? Has the coming into effect of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) had any impact on FDI inflows in developing countries? This paper answers these questions by the use of panel data for a cross – section of 75 developing countries over a period of 19 years (1985 – 2003). The results of the study indicate that: 1) strengthening IPR has a positive effect on FDI; 2) the impact of patent protection on FDI after the TRIPS agreement is far and above that of the pre – TRIPS era; 3) the degree of openness, growth rate of the economy and investment are also key determinants of FDI. The findings of the study suggest that strengthening IPR is only one component of the many factors needed to maximize the potential of developing countries to attract FDI.
Highlights
Intellectual property rights (IPR) reform has been underway since the 1990s and actively pursued by most developing countries after the World Trade Organization’s (WTO) Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) came into effect on January 1, 1995 (Commission on Intellectual Property Rights [CIPR], 2002)
Under the terms of TRIPS, current and future members of WTO must adopt and enforce strong non-discriminatory minimum standards of intellectual property protection in each of the areas commonly associated with IPRs including patents, copyrights, trademarks, and trade secrets
The strengthening of IPR globally benefits the developed nations who own most of the intellectual property, developing countries are expected to benefit in terms of FDI and technology transfer where there is an incentive to disseminate and share in the benefits of Research and Development (R & D) (Asid et al, 2004)
Summary
Intellectual property rights (IPR) reform has been underway since the 1990s and actively pursued by most developing countries after the World Trade Organization’s (WTO) Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) came into effect on January 1, 1995 (Commission on Intellectual Property Rights [CIPR], 2002). The strengthening of IPR globally benefits the developed nations who own most of the intellectual property, developing countries are expected to benefit in terms of FDI and technology transfer where there is an incentive to disseminate and share in the benefits of Research and Development (R & D) (Asid et al, 2004). It is important to note that the study’s sample is made up of only developing countries as most studies have shown differential effects of IPR on FDI for developing and developed countries (Seyoum, 1996; Park and Lippoldt, 2003; Kalande, 2002; Falvey et al, 2006). The study examines how other important factors like political and economic risk, return on investment, growth rate, and trade affect the inflow of FDI in developing countries.
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