Review of World Economics

, Volume 140, Issue 3, pp 393–414 | Cite as

Intellectual property rights and foreign direct investment: A disaggregated analysis

  • Peter NunnenkampEmail author
  • Julius Spatz


This paper aims at overcoming several shortcomings of previous empirical studies on the relationship between IPR protection and FDI. First of all, we use sectorally disaggregated FDI data for a large sample of host countries. Second, we address the proposition that stronger IPR protection raises not only the quantity but also the quality of FDI. Third, we check to which extent the relationship between IPR protection and FDI is affected by applying alternative measures of IPR protection. Our empirical findings support the hypothesis that the threat of an unauthorized use of intellectual-property-related assets and, thus, FDI depends on industry as well as host-country characteristics. Furthermore, stronger IPR protection may help induce high-quality FDI. JEL no. F21, F23


Intellectual property rights ownership advantages imitative capacity quantity and quality of FDI industry characteristics host-country characteristics 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Barro, R. J., and J.-W. Lee (2000). International Data on Educational Attainment: Updates and Implications. Working Paper 42. Center for International Development 〈〉.Google Scholar
  2. BEA (Bureau of Economic Analysis) (2003). Online Data Base on U.S. Direct Investment Abroad 〈〉.Google Scholar
  3. Carr, D. L., J. R. Markusen, and K. E. Maskus (2001). Estimating the Knowledge-Capital Model of the Multinational Enterprise.American Economic Review 91 (3): 693–708.CrossRefGoogle Scholar
  4. Dunning, J. H. (1977). Trade, Location of Economic Activities and the MNE: A Search for an Eclectic Approach. In P.-O. Hesselborn, B. G. Ohlin, P.-M. Wijkman (eds.),The International Allocation of Economic Activity. London: Basingstoke.Google Scholar
  5. Dunning, J. H. (1981).International Production and the Multinational Enterprise. London: George Allen and Unwin.Google Scholar
  6. Ferrantino, M. J. (1993). The Effect of Intellectual Property Rights on International Trade and Investment.Review of World Economics/Weltwirtschaftliches Archiv 129 (2): 300–331.CrossRefGoogle Scholar
  7. Ginarte, J. C., and W. G. Park (1997). Determinants of Patent Rights: A Cross-National Study.Research Policy 26 (3): 283–301.CrossRefGoogle Scholar
  8. Horstmann, I. J., and J. R. Markusen (1987). Licensing versus Direct Investment: A Model of Internalization by the Multinational Enterprise.Canadian Journal of Economics 20 (3): 464–481.CrossRefGoogle Scholar
  9. Jost, T., and P. Nunnenkamp (2003). Deutsche Direktinvestitionen in Entwicklungs-und Reformländern: Haben sich die Motive gewandelt?Die Weltwirtschaft (1): 107–130.Google Scholar
  10. Kaufmann, D., A. Kraay, and P. Zoido-Lobatón (2002). Governance Matters, II: Updated Indicators for 2001–02. World Bank, Washington, D.C. 〈〉.Google Scholar
  11. Lee, J.-Y., and E. W. Mansfield (1996). Intellectual Property Protection and US Foreign Direct Investment.Review of Economics and Statistics 78 (2): 181–186.CrossRefGoogle Scholar
  12. Maskus, K. E. (1998). The International Regulation of Intellectual Property.Review of World Economics/Weltwirtschaftliches Archiv 134 (2): 186–208.Google Scholar
  13. Maskus, K. E. (2000). Intellectual Property Rights and Foreign Direct Investment. Policy Discussion Paper 0022. University of Adelaide, Centre for International Economic Studies, Adelaide.Google Scholar
  14. Maskus, K. E., and D. R. Eby-Konan (1994). Trade-Related Intellectual Property Rights: Issues and Exploratory Results. In A. V. Deardorff and R. M. Stern (eds.),Analytical and Negotiating Issues in the Global Trading System. Ann Arbor: University of Michigan Press.Google Scholar
  15. Moran, T. H. (1998).Foreign Direct Investment and Development. The New Policy Agenda for Developing Countries and Economies in Transition. Washington, D.C.: Institute for International Economics.Google Scholar
  16. Nicholson, M. (2003). The Impact of Industry Characteristics on International Technology Transfer. Federal Trade Commission. Washington, D.C.Google Scholar
  17. Nunnenkamp, P., and J. Spatz (2002). Determinants of FDI in Developing Countries: Has Globalization Changed the Rules of the Game?Transnational Corporations 11 (2): 1–34.Google Scholar
  18. Nunnenkamp, P., and J. Spatz (2003). Intellectual Property Rights and Foreign Direct Investment: The Role of Industry and Host-Country Characteristics. Kiel Working Paper 1167. Institute for World Economics, Kiel.Google Scholar
  19. Primo Braga, C. A., and C. Fink (2000). International Transactions in Intellectual Property and Developing Countries.International Journal of Technology Management 19 (1/2): 35–56.CrossRefGoogle Scholar
  20. Smarzynska, B. K. (2004). The Composition of Foreign Direct Investment and Protection of Intellectual Property Rights: Evidence from Transition Economies.European Economic Review 48 (1): 39–62.CrossRefGoogle Scholar
  21. Smith, P. J. (2001). How Do Foreign Patent Rights Affect U.S. Exports, Affiliate Sales, and Licenses?Journal of International Economics 55 (2): 411–439.CrossRefGoogle Scholar
  22. WEF (World Economic Forum) (2002).The Global Competitiveness Report 2001–2002. New York: Oxford University Press.Google Scholar
  23. White, H. (1980). A Heteroskedastic-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity.Econometrica 48 (4): 817–838.CrossRefGoogle Scholar
  24. World Bank (2002).World Development Indicators. CD-ROM. Washington, D.C.Google Scholar
  25. Yang, G., and K. E. Maskus (2001). Intellectual Property Rights and Licensing: An Econometric Investigation.Review of World Economics/Weltwirtschaftliches Archiv 137 (1): 58–79.Google Scholar

Copyright information

© Giel Institute for World Economics 2004

Authors and Affiliations

  1. 1.Kiel Institute for World EconomicsKiel

Personalised recommendations