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Patent Protection, Strategic FDI and Location Choices: Empirical Evidence from French Subsidiaries' Location Choices in Emerging Economies

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  • Etienne Pfister
  • Bruno Deffains

Abstract

This article studies the location choices of French firms in 17 developing countries. Detailed attention is paid to the role of the patent rights in the host country. On the one hand, the reduction in competition that follows greater patent protection can attract foreign subsidiaries. On the other hand, foreign direct investment (FDI) can have the 'strategic' purpose of deterring local competitors. In that case, FDI and patent protection are substitutes and a greater enforcement of patent rights may reduce the strategic incentives to invest in a country, especially if the markets are large enough. Our regressions indicate that on average, patent rights exert only a negligible influence on the location choices of French firms. However, if the market potential of the host countries is sufficiently large or if their expenditures on R&D are sufficiently small, a greater effectiveness of patents decreases the probability of location.

Suggested Citation

  • Etienne Pfister & Bruno Deffains, 2005. "Patent Protection, Strategic FDI and Location Choices: Empirical Evidence from French Subsidiaries' Location Choices in Emerging Economies," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(3), pages 329-346.
    • Handle: RePEc:taf:ijecbs:v:12:y:2005:i:3:p:329-346
    DOI: 10.1080/13571510500299458
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    Cited by:

    1. Antonakakis, Nikolaos & Tondl, Gabriele, 2012. "Do determinants of FDI to developing countries differ among OECD investors? Insights from Bayesian model averaging," Discussion Papers 1/12, Europa-Kolleg Hamburg, Institute for European Integration.
    2. Mathew, Anuj Joshua & Mukherjee, Arijit, 2014. "Intellectual property rights, southern innovation and foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 128-137.
    3. Nikolaos Antonakakis & Gabriele Tondl, 2015. "Robust determinants of OECD FDI in developing countries: Insights from Bayesian model averaging," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1095851-109, December.
    4. repec:wsr:wpaper:y:2011:i:076 is not listed on IDEAS
    5. Zheng, Zhijie & Huang, Chien-Yu & Yang, Yibai, 2020. "Patent protection, innovation, and technology transfer in a Schumpeterian economy," European Economic Review, Elsevier, vol. 129(C).
    6. Papageorgiadis, Nikolaos & Cross, Adam R. & Alexiou, Constantinos, 2013. "The impact of the institution of patent protection and enforcement on entry mode strategy: A panel data investigation of U.S. firms," International Business Review, Elsevier, vol. 22(1), pages 278-292.

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