Intellectual property and the organization of the global value chain

Stefano Bolatto, Alireza Naghavi, Gianmarco Ottaviano and Katja Zajc Kejzar

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper introduces the concept of intangible assets in a property rights model of sequential supply chains. Firms transmit knowledge to their suppliers to facilitate input customization. Yet, to avoid knowledge dissipation, they must protect the transmitted intangibles, the cost of which depends on the knowledge intensity of inputs and the quality of institutions protecting intellectual property rights (IPR) in supplier locations. When input knowledge intensity increases (decreases) downstream and suppliers' investments are complements, the probability of integrating a randomly selected input is decreasing (increasing) in IPR quality and increasing (decreasing) in the relative knowledge intensity of downstream inputs. Opposite but weaker predictions hold when suppliers' investments are substitutes. Comprehensive trade and FDI data on Slovenian firms' value chains provide evidence in support of our model's predictions. They also suggest that, in line with our model, better institutions may have very different effects on firm organization depending on whether they improve the protection of tangible or intangible assets.

Keywords: sequential production; intellectual property; intangible assets; appropriability; stage complementarity; upstreamness; firm organization; outsourcing; vertical integration (search for similar items in EconPapers)
JEL-codes: D23 F12 F14 F21 F23 L22 L23 L24 O34 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2020-01-21
New Economics Papers: this item is included in nep-com, nep-int and nep-knm
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Downloads: (external link)
http://eprints.lse.ac.uk/108228/ Open access version. (application/pdf)

Related works:
Journal Article: Intellectual property and the organization of the global value chain (2023)
Working Paper: Intellectual property and the organization of the global value chain (2020)
Working Paper: Intellectual Property and the Organization of the Global Value Chain (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:108228

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