Contracts, intellectual property rights, and multinational investment in developing countries

James Markusen

Chapter 8 in Broadening Trade Theory:Incorporating Market Realities into Traditional Models, 2021, pp 159-174 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The policy debate between multinational firms favoring strong contract law, and host-country governments who often oppose such protection motivates the paper. Local agents (managers) learn the multinational’s technology and can defect to start a rival firm. Contract enforcement, including binding the multinational itself, makes the multinational better off. Outcomes for the host country are more complex, depending on mode switches induced by enforcement. If enforcement induces the multinational to switch from exporting to local production, welfare improves. If local production was occurring anyway, enforcement may result in the loss of rents to local agents and lower welfare.

Keywords: Multinational Firms; Horizontal Multinationals; Vertical Multinationals; Internalization; Vertical Integration; Outsourcing; Foreign Affiliates; Per-Capita Income; Non-homothetic Preferences; Income Elasticity of Demand; Missing Trade Puzzle; Skill Premium Puzzle; Pro-competitive Gains From Trade; Complements; Externalities (search for similar items in EconPapers)
JEL-codes: F00 F02 F13 F41 F43 (search for similar items in EconPapers)
Date: 2021
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Related works:
Journal Article: Contracts, intellectual property rights, and multinational investment in developing countries (2001)
Working Paper: Contracts, Intellectual Property Rights, and Multinational Investment in Developing Countries (1998)
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