Intellectual Property Rights Protection and the Location of Research and Development Activities by Multinational Firms

Rene Belderbos, Kyoji Fukao and Hyeog Ug Kwon

Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: We develop a model of the location of global R&D investments by multinational firms, where research investments increase the number of varieties of goods sold globally by the firm, and development activities reduce the cost of producing existing varieties in specific countries. Intellectual Property Rights (IPR) protection in a country enhances the efficiency of the firms' local research as well as the profitability local development efforts. We test predictions of the model on survey data on foreign and domestic R&D for 605 Japanese multinational firms with manufacturing activities in 42 foreign countries in 1996. We find the strength of IPR protection to have a positive impact both on development expenditures and research expenditures in a country, while both research and development expenditures are also sensitive to local wage costs. Research expenditures depend positively on technological opportunities in the industry and country, while development expenditures are positively affected by potential local demand for the firm's products.

Keywords: R&D; multinational firms; Foreign Direct Investment (search for similar items in EconPapers)
JEL-codes: F23 O32 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-ino and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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