Relationship-Speci?c Investments and Intellectual Property Rights Enforcement with Heterogeneous Suppliers
Alireza Naghavi (),
Shin-Kun Peng () and
Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna
This paper examines the impact of intellectual property rights (IPR) enforcement on multinationals’ choice of input suppliers and industry profits in a host economy. The framework consists of suppliers with heterogeneous capabilities who must engage in a relation-specific investment to customize intermediate inputs upon a transfer payment by final producers. An outsourcing contract with better technologically-endowed suppliers requires a lower transfer and generates a higher surplus. Stronger IPR enforcement leads firms to self-select into better quality suppliers on average by reducing their outside option. Weak legal institutions instead make it possible for a larger range of suppliers, including the less capable ones, to form partnerships by granting them a larger outside option. A better IPR environment is more likely to harm lagging countries where the technology distribution is characterized by less capable suppliers.
JEL-codes: D23 F21 F23 L22 L24 O32 O34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-ipr and nep-pr~
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Journal Article: Relationship-specific Investments and Intellectual Property Rights Enforcement with Heterogeneous Suppliers (2017)
Working Paper: Relationship-Specific Investments and Intellectual Property Rights Enforcement with Heterogeneous Suppliers (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp985
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