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Innovation and Patent Protection: A Multicountry Study on the Determinants of R&D Offshoring

  • Giulia ValacchiEmail author
Chapter
Part of the India Studies in Business and Economics book series (ISBE)

Abstract

This paper looks at the role that intellectual property rights (IPR) protection plays in the decision of multinational corporations (MNCs) to locate their R&D activities abroad, a phenomenon which has been labelled in the literature as innovation offshoring. Do countries with stronger IPRs attract more offshored innovation? Do different types of innovation offshoring respond equally to IPR variations? Using a novel multicountry and multisector database gathering information on the innovation activity of more than 15,000 MNCs from all around the world, I am able to distinguish among two types of innovation offshoring: innovation carried out in nations different from the home country, where the firm undertakes production activities directly or indirectly through a subsidiary (commercial innovation), and research done in countries, where the MNC only collaborates with local firms or inventors, with no on-site production involved (external innovation). In order to better isolate the impact of property rights protection on R&D, my identification strategy takes into consideration IPR’s variation across industries. I find that firms tend to locate commercial innovation in countries with strong IPR protection. This is true especially for long life-cycle industries which rely longer on patents. In contrast, short life-cycle technologies with faster obsolescence rate (e.g. high-tech products) are less responsive to IPR protection. External innovation, on the other hand, is less affected by patent protection, suggesting other motives behind its location decisions.

Notes

Acknowledgments

The research leading to these results was funded by the Swiss National Science Foundation under the Sinergia project. Project n 149087. I am grateful to Joelle Noailly for fruitful discussions about this project. I thank Suchita Srinivasan, Roberto Crotti, Marco Pistis, Philipp Boing and Banban Wang for insightful comments about the paper. Further, I thank the participants of the 17th ZEW Summer Workshop for Young Economists, the 9th MEIDE conference, the 11th Annual Conference of Knowledge Forum, the 39th IAEE conference and all the Sinergia partners. All errors remain mine.

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Copyright information

© Springer Nature Singapore Pte Ltd. 2018

Authors and Affiliations

  1. 1.Graduate Institute of GenevaGenevaSwitzerland

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