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Intellectual Property Rights and Entry into a Foreign Market: FDI versus Joint Ventures

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  • Dermot Leahy
  • Alireza Naghavi

Abstract

We study the effect of the intellectual property rights (IPR) regime of a host country (South) on a multinational's decision between serving a market via greenfield foreign direct investment to avoid the exposure of its technology or a North–South joint venture (JV) with a local firm, which allows R&D spillovers under imperfect IPRs. JV is the equilibrium market structure when R&D intensity is moderate and IPRs strong. The South can gain from increased IPR protection because it encourages a JV, whereas policies to limit foreign ownership in a JV gain importance in technology‐intensive industries as complementary policies to strong IPRs.

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  • Dermot Leahy & Alireza Naghavi, 2010. "Intellectual Property Rights and Entry into a Foreign Market: FDI versus Joint Ventures," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 633-649, September.
    • Handle: RePEc:bla:reviec:v:18:y:2010:i:4:p:633-649
    DOI: 10.1111/j.1467-9396.2010.00901.x
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    2. Ramin Dadasov & Oliver Lorz, 2013. "Mode of International Investment and Endogenous Risk of Expropriation," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 974-983, November.
    3. Alireza Naghavi & Yingyi Tsai, 2015. "Cross-Border Intellectual Property Rights: Contract Enforcement and Absorptive Capacity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(2), pages 211-226, May.
    4. Xinlei Qian & Minghao Sun & Minjie Pan & Weiyong Zou & Guoxiang Li, 2023. "Intellectual property rights policy and foreign direct investment: A quasi‐natural experiment from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2378-2392, June.
    5. Poyago-Theotoky, Joanna & Tsai, Yingyi, 2023. "Universally strong IPR protection and global welfare: A market-penetration perspective," Economic Modelling, Elsevier, vol. 124(C).
    6. Morita, Hodaka & Nguyen, Xuan, 2021. "FDI and quality-enhancing technology spillovers," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    7. Dapeng Cai & Jie Li, 2012. "Quid pro quo and the enforcement of intellectual property rights protection: A bargaining approach," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(6), pages 755-772, December.
    8. Po-Lu Chen, 2013. "Modes of Foreign Direct Investment and Intellectual Property Rights Protection: Wholly-owned or Joint Venture? Firm-level Evidence from Taiwanese Multinational Manufacturing Enterprises," Review of International Economics, Wiley Blackwell, vol. 21(3), pages 549-561, August.
    9. Prud'homme, Dan & von Zedtwitz, Max, 2019. "Managing “forced” technology transfer in emerging markets: The case of China," Journal of International Management, Elsevier, vol. 25(3), pages 1-1.
    10. Yi-Fan Chen & Alireza Naghavi & Shin-Kun Peng, 2021. "Learning by supplying and competition threat," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(1), pages 121-148, February.
    11. Juan Carlos Bárcena-Ruiz & María Begoña Garzón, 2017. "Environmental Policy, North-South Trade and FDI," Journal of Industry, Competition and Trade, Springer, vol. 17(4), pages 371-386, December.

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