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Intellectual Property-Related Preferential Trade Agreements and Offshoring to Developing Countries

Claudia Canals, Michael Klein () and Fuat Sener

MPRA Paper from University Library of Munich, Germany

Abstract: International standards in the protection of intellectual property rights (IPRs) are increasingly guided by bilateral and regional preferential trade agreements (PTAs). In this paper, we estimate the effect of these IP-related PTAs on US offshoring behavior in developing countries. We utilize a difference-in-difference empirical methodology that addresses several possible sources of endogeneity and exploits industry variation in the importance of IPRs to identify the effect of these PTA-induced IPR reforms. We find that IP-related PTAs are associated with a substantial increase in US offshoring in IPR-intensive industries relative to non-IPR-intensive industries. This increase occurs both within the boundaries of the multinational firm and through arm’s-length contracts with domestic firms. We do not find strong evidence for a compositional shift towards either type of offshoring. These findings provide direct empirical evidence that PTA-induced IPR reform stimulates multinational activity in developing countries.

Keywords: Intellectual property rights; Patents; Preferential trade agreements; Offshoring; Outsourcing; Subcontracting; Multinational firms (search for similar items in EconPapers)
JEL-codes: F13 F23 O33 O34 (search for similar items in EconPapers)
Date: 2021-05-11
New Economics Papers: this item is included in nep-cta, nep-int and nep-knm
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