Will Intellectual Property Rights Policy Increase Foreign Direct Investment and Promote Technological Innovation?

Debao Hu,Jing Zhao,Zhengkai Liu,Weijun Zhou

doi:10.1155/2021/6672060

Abstract

In this paper, we discuss the effects of intellectual property rights (IPRs) on FDI and indigenous innovation and the overall effects of IPR on the Southern and Northern countries. Our model predicts that tighter IPR is good for FDI and indigenous innovation; however, the effects vary according to the initial resource endowment such as skill level and absorptive capacity. By a game theory model, we also find that tighter IPR benefits both sides if the innovation is the common knowledge to both players, and it improves indigenous innovation and welfare in a short term, but they will emerge in the long run. We also discuss the further direction to an empirical study. Finally, we make the following conclusion: IPR is part of business environment, and tighter IPR in progress is good for boosting welfare of both sides. It is time to build a better environment for IPR, but the cost of patent enforcement policy and the trade barrier must be taken into account.

Highlights

Over the past four decades, there has been a global trend toward stronger intellectual property rights (IPRs) protection, especially after the enforcement of the Agreement on TradeRelated Aspects of Intellectual Property Rights by the WTO
Zhuang and Zou [18] use the similar framework, and they focus on the North-South intellectual property rights conflict related with market structure. irdly, we introduce game theory to discover the nature of innovation and to discuss the effects of tighter IPR on the strategic behavior between the North and the South
Two cases deserve considering. (i) In the steady state, if skill level in developing countries satisfies 0 < hS ≤ hcS, there exists a critical value of imitation rate μc, and a low range of imitation rates 0 < μ < min(μc, hS/aM). (ii) If skill level in developing countries is so enough that hS > hcS, and if μc < hS/aM, there exists a high range of imitation rate μc < μ < hS/aM

Summary

Introduction

Over the past four decades, there has been a global trend toward stronger intellectual property rights (IPRs) protection, especially after the enforcement of the Agreement on TradeRelated Aspects of Intellectual Property Rights by the WTO. Firms in developing countries imitate the products of MNCs. ey conclude that the effects of IPR protection depend on innovation types. We build an extended North-South product cycle model in which Northern innovation and FDI, imitation, and Southern indigenous innovation are all endogenous. We assume that indigenous innovation targets only MNCs. the price of Southern imitator can be held on when it lies below the marginal cost of multinational firm, which satisfies pSM wS. Equations (45)–(49) define the steady state equilibrium of the model in terms of five endogenous variables: the rate of Northern innovation, the rate of Southern indigenous innovation, the imitation rate, FDI, and the supply of skilled labor in South

The Effects of IPR Protection with Indigenous FDI

Game Theory Analysis

Findings

Conclusion