This paper develops a product cycle model with endogenous innovation, imitation, and foreign direct investment (FDI). We use this model to determine how stronger intellectual property rights (IPR) protection in the South affects innovation, imitation and FDI. We find that stronger IPR protection keeps multi-nationals safer from imitation, but no more so than Northern firms. Instead, the increased difficulty of imitation generates resource wasting and imitation disincentive effects that reduce both FDI and innovation. The greater resources absorbed in imitation crowd out FDI. Reduced FDI then transmits resource scarcity in the South back to the North and consequently contracts innovation.

This paper surveys the trade literature on international technology transfer, paying particular attention to the role of foreign direct investment. A central question of interest is whether technologies introduced by multinationals diffuse to local firms. Major conclusions of theoretical models as well as the relevant empirical evidence regarding technology spillovers are discussed. The paper also discusses the potential impact of host country policies regarding trade, foreign direct investment, and intellectual property rights protection on international technology transfer.

Of the diverse factors motivating technological change, one factor that has received increasing attention in the recent past has been the protection of intellectual property rights. Given fairly recent changes in the international policy ethos where a regime of stronger intellectual property protection has become a fait accompli for most developing countries, it is of some significance to ask whether more stringent protection of intellectual property does indeed encourage innovation. And this is the question which this paper examines, utilising crosscountry panel data on R&D investment, patent protection and other country-specific characteristics spanning the period 1981-1990. The evidence unambiguously indicates the significance of intellectual property rights as incentives for spurring innovation. JEL Classification: O34, O31 Keywords: Intellectual Property Rights, Technological Change, Economic Growth 2 Does Intellectual Property Protection spur Technological Change? Sunil Kanwar and Robert Evenson A distinctive characteristic of modern economic growth has been the significant role played by technological change. Of the diverse factors motivating technological change, one factor that has received increasing attention in the recent past has been the role of intellectual property protection. Given the shift in the ownership distribution of innovations away from individuals and towards large corporations in `recent decades' 1 , intellectual property protection has arguably become an even more important stimulus than hitherto; for such protection augments both the means and the incentive to undertake expensive innovation. While there has been an on-going debate on whether strong(er) intellectual property protection encourages or retards the rate of technological cha...

We build a multi-sectoral North–South trade model to analyze international intellectual property rights (IPR) protection. By comparing the Nash equilibrium IPR protection standard of the South (the developing countries) with that of the North (the developed countries), we find that the former is naturally weaker than the latter. Moreover, we show that both regions can gain from an agreement that requires the South to harmonize its IPR standards with those of the North, and the North to liberalize its traditional goods market. This demonstrates the merits of multi-sectoral negotiations in the GATT/WTO.

this article we discuss the role of research in macroeconomic and structural reforms. After examining how analytic work guided policy on poverty and the distributional impact of growth in Uganda, we explore how data were used to shape sector policy, especially policy affecting public services, assets, and governance. We also show how the research--policy link was institutionalized in the peap

In a model with endogenous number of innovating firms, we show that whether patent protection increases R&D investment is ambiguous, and depends on the market demand function and the cost of R&D. If the market size increases with number of firms, patent protection reduces R&D investment if the cost of R&D is sufficiently high, and higher product differentiation increases the possibility of lower R&D investment under patent protection. If the market size does not increase with number of firms, patent protection never reduces R&D investment. We find that welfare is lower under patent protection than under no patent protection. * I would like to thank two anonymous referees of this journal and the Editor for helpful comments and suggestions. The usual disclaimer applies.

I present a model in which the incomplete nature of contracts governing international transactions limits the extent to which the production process can be fragmented across borders. Because of contractual frictions, goods are initially manufactured in the same country where product development takes place. Only when the good becomes sufficiently standardized is the manufacturing stage of production shifted to a low-wage foreign location. Solving for the optimal organizational structure, I develop a new version of the product cycle hypothesis in which manufacturing is shifted abroad first within firm boundaries, and only at a later stage to independent foreign firms. (JEL D23, F12, F14, F21, F23, L22, L33) In an enormously influential article, Raymond Vernon (1966) described a natural life cycle for the typical commodity. Most new goods, he argued, are initially manufactured in the country where they are first developed, with the bulk of innovations occurring in the industrialized North. Only when the appropriate designs have been worked out, and the production techniques have been standardized, is the locus of production shifted to the less developed South, where wages are lower. Vernon emphasized the role of multinational firms in the international transfer of technology. In his formulation of a product’s life cycle, the shift of production to the South is a profit-maximizing decision from the point of view of the innovating firm. The “product cycle hypothesis ” soon gave rise to an extensive empirical literature that

What are the effects of strengthening developing countries ’ protection for intellectual property rights on economic growth, social welfare and income inequality in the global economy? To analyze this question, we develop a two-country R&D-based growth model with wealth heterogeneity. We find that the North experiences higher growth and welfare at the expense of higher income inequality while the South experiences higher growth at the expense of lower welfare and higher income inequality. As for global welfare, there exists a critical degree of cross-country spillovers below (above) which global welfare decreases (increases). In light of these findings, we discuss policy implications on China’s accession to the World Trade Organization in 2001.

The statistical analysis of firm-level data on U.S. multinational enterprises was conducted at the International Investment Division of the Bureau of Economic Analysis, U.S. Department of Commerce under arrangements that maintain legal confidentiality arrangements. The views expressed herein are those of the authors and do not reflect official positions of the U.S. Department of Commerce. We wish to thank Pol Antras,

Abstract: In the context of international technology transfer from the developed North to the developing South, this paper analyses the impact of the Southern patent protection on the innovation rate in the North and the welfare effect in the South. In a two-period model, we show how the different modes of technology transfers (licensing or subsidiary) affect the R&D incentive and thereby the rate of innovation in the North. It is shown that under the licensing contract, no patent protection in the South is best for the South as it increases the innovation rate in the North, thereby leading to greater welfare in the South. We also argue for certain degree of patent protection in the South for maximization of its welfare under some parameter configurations.