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IPR protection and optimal entry modes of multinationals

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  • Banerjee, Tanmoyee
  • Biswas, Nilanjana

Abstract

The present paper develops a model to analyze the relationship between modes of entry of a Multinational Corporation (MNC) in a vertically differentiated market in a Less Developed Country (LDC) to the Intellectual Property Rights (IPR) protection policy adopted by the LDC government. The MNC has two options of entry: fragment production structure and shift assembling unit to LDC, or shift entire production to LDC with full technology transfer. The MNC incurs investment to control the copying of the original product by a commercial pirate in the two modes of entry. The results show that the optimal anti-copying investment is inversely related with the IPR protection rate chosen by the LDC government. The government may or may not monitor in equilibrium. However, government monitoring may not result in complete deterrence of piracy. Further, the MNC shifts complete production to LDC with full technology transfer if the transport-cost of sending semi-finished product from developed country to LDC is above a critical level, otherwise a fragmented mode of entry takes place with assembly-line FDI in LDC.

Suggested Citation

  • Banerjee, Tanmoyee & Biswas, Nilanjana, 2016. "IPR protection and optimal entry modes of multinationals," Economics Discussion Papers 2016-5, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:20165
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    References listed on IDEAS

    as
    1. Vishwasrao, Sharmila, 1994. "Intellectual property rights and the mode of technology transfer," Journal of Development Economics, Elsevier, vol. 44(2), pages 381-402, August.
    2. Banerjee, Dyuti S., 2003. "Software piracy: a strategic analysis and policy instruments," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 97-127, January.
    3. Kiema, Ilkka, 2008. "Commercial piracy and intellectual property policy," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 304-318, October.
    4. Joshua Slive & Dan Bernhardt, 1998. "Pirated for Profit," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 886-899, November.
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    6. Dyuti S. Banerjee & Tanmoyee Banerjee (Chatterjee) & Ajitava Raychaudhuri, 2008. "Optimal Enforcement And Anti‐Copying Strategies To Counter Copyright Infringement," The Japanese Economic Review, Japanese Economic Association, vol. 59(4), pages 519-535, December.
    7. Yuanzhu Lu & Sougata Poddar, 2012. "Accommodation or deterrence in the face of commercial piracy: the impact of intellectual property rights protection," Oxford Economic Papers, Oxford University Press, vol. 64(3), pages 518-538, July.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    assembly line FDI; FDI with technology transfer; piracy; IPR protection;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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