Intellectual Property Rights and Entry into a Foreign Market: FDI versus Joint Ventures

Dermot Leahy and Alireza Naghavi

Review of International Economics, 2010, vol. 18, issue 4, 633-649

Abstract: We study the effect of the intellectual property rights (IPR) regime of a host country (South) on a multinational's decision between serving a market via greenfield foreign direct investment to avoid the exposure of its technology or a North–South joint venture (JV) with a local firm, which allows R&D spillovers under imperfect IPRs. JV is the equilibrium market structure when R&D intensity is moderate and IPRs strong. The South can gain from increased IPR protection because it encourages a JV, whereas policies to limit foreign ownership in a JV gain importance in technology‐intensive industries as complementary policies to strong IPRs.

Date: 2010
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