Abstract
As foreign innovation, and the related patenting activity, continues to steadily increase, it is timely to examine the impact of the relative growth of foreign patents on host-country firms. We investigate one particular aspect of a company’s investment strategy – debt raising. We argue that a relative rise in non-resident patents increases spillover effects, so that local firms may invest less in R&D, thus allowing them to take on more debt, and invest more in serving foreign companies or in fighting them, thus potentially resorting to more debt to fund their competitive moves. Further, we argue that these relationships depend on two important contingencies: country-level intellectual property rights (IPR) protection and industry-level IP intensiveness. Data of all publicly listed companies in 19 emerging-market countries from 2000 to 2018 provide robust support for these assertions.
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