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International technology transfer and domestic patent policy: An empirical analysis of Indian industry

Author

Listed:
  • Ruchi Sharma
  • Sunil Kumar Ambrammal

    (Indian Institute of Technology, Indore, India)

Abstract

Firms in the developing countries transfer technology predominantly produced in the developed economies through different modes namely market-mediated channels including trade in goods and services, foreign direct investment, licensing or non-market channels like employees turnover. Multitude of host country’s factors (locational and policy related) influences the mode-choice decision of multinational enterprises among exports, FDI and licensing to work in a host country. Among these factors, provision for the protection of patent rights reduces transactions costs that lead to externalization in form of arm’s-length licensing against FDI. India has made patent policy changes during the post globalization period to comply with Trade Related Intellectual Property Rights Agreement. Accordingly, this study attempts to find the influence of the patent policy changes on licensing strategy of the Indian manufacturing industry. This paper is based on panel data of 51 industries for period 1989-90 to 2009-10. We have checked each panel data regression for the presence of heteroscedasticity, contemporaneous correlation and serial correlation. In case of the presence of heteroscedasticity and contemporaneous correlation the results are based on heteroskedastic panels corrected standard errors and correlated panels corrected standard errors. As the modeling is based on macro-panel data having large number of industries (N) and time period (T) each data series is checked for unit-root using panel data unit-root tests. The study uses Fisher type test. We estimate the model after controlling for the general policy changes in India following the liberalization, privatization and globalization of the economy. We are able to establish a substitutable relationship between licensing from international market and in-house R&D. The removal of licensing regulations of different industries has a positive influence on the firm’s decision to license. We also find a complementary relationship between capital goods import and licensing. Thus, policy makers should allow for easy capital imports to facilitate technology transfers. The study indicates that patent policy influences technology transfer to India albeit negatively and limited to patent-sensitive industries confirming the monopoly power effect for such industries. Thus, policy makers have to use regulatory approach to facilitate transfers instead of merely relying on the market approach. Moreover, with respect to patent-sensitive industries there is need to closely watch the licensing behavior of the technology owners for anti-competitive practices.

Suggested Citation

  • Ruchi Sharma & Sunil Kumar Ambrammal, 2015. "International technology transfer and domestic patent policy: An empirical analysis of Indian industry," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(3), pages 165-181, July-Sepe.
  • Handle: RePEc:jda:journl:vol.49:year:2015:issue3:pp:165-181
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    Citations

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    Cited by:

    1. Shu-Hao Chang, 2024. "International Technology Market Hotspots and Development Trends from the Perspective of Inventor Mobility," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 2361-2382, March.
    2. Panda, Sidheswar & Sharma, Ruchi, 2021. "Do changes in patent policy influence firms’ technology strategy? Evidence from manufacturing in India," Journal of Policy Modeling, Elsevier, vol. 43(2), pages 362-375.

    More about this item

    Keywords

    Licensing; Research and Development; Patent Policy;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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