Trade liberalization, absorptive capacity and the protection of intellectual property rights

Arghya Ghosh and Jota Ishikawa

Review of International Economics, 2018, vol. 26, issue 5, 997-1020

Abstract: We examine how trade liberalization affects South's incentive to protect intellectual property rights (IPR) in a North–South duopoly model where a low‐cost North firm competes with a high‐cost South firm in the South market. The North firm serves the South market through either exports or foreign direct investment (FDI). The extent of effective cost difference between North and South depends on South's imitation, which in turn depends on South's IPR protection and absorptive capacity and North firm's location choice, all of which are endogenously determined in our model. For a given level of IPR protection, South's absorptive capacity under exports may be greater than under FDI. Even though innovation is exogenous to the model (and hence unaffected by South's IPR policy), strengthening IPR protection in South can improve its welfare. The relationship between trade costs and the degree of IPR protection that maximizes South welfare is non‐monotone. In particular, South has an incentive to protect IPR only when trade costs are moderate. When masking technology or licensing is incorporated into the model, however, some protection of IPR may be optimal for South even if the trade costs are not moderate.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1111/roie.12367

Related works:
Working Paper: Trade Liberalization, Absorptive Capacity and the Protection of Intellectual Property Rights (2018)
Working Paper: Trade Liberalization, Absorptive Capacity and the Protection of Intellectual Property Rights (2018)
Working Paper: Trade Liberalization, Absorptive Capacity and the Protection of Intellectual Property Rights (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:reviec:v:26:y:2018:i:5:p:997-1020

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0965-7576

Access Statistics for this article

Review of International Economics is currently edited by E. Kwan Choi

More articles in Review of International Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().