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The role of intelectual property rights on entry decisions

Gustavo Canavire (SEBOL, IDB) and Luis Castro (SEBOL, UPB) published the paper : Can Intellectual Property Rights Affect Multinational Enterprises’ Entry Modes? The Chilean Case in the “International Journal of the Economics of Business”. Congratulations to both!

Paper summary

Multinational Enterprises (MNEs) can choose between exporting, introducing foreign direct investment (FDI), and licensing to a domestic firm among other modes of entry to a new market. Yet, this decision may be affected by the strength of intellectual property rights (IPR). Thus, this paper analyzes the effect of stronger IPR on the entry modes chosen by MNEs. We propose a theoretical model that predicts that in the presence of stronger IPR, MNEs would choose licensing instead of FDI as an entry mode. We test the predictions of the model using plant-level data for Chile for the period 2001–2007. We exploit the exogenous reform of IPR in 2005, controlling for the activities of industries where high levels of technology transfer and imitation are important factors. The main results show that stronger IPR change the mode of entry chosen by MNEs. In this case, FDI is replaced by licensing. This is explained by Chile’s high absorptive capacity during this period. We test whether this effect differs across high- and low-tech industries and conclude that the displacement of FDI is less severe in high-tech industries.

You can access the published version here (gated):

https://www.tandfonline.com/doi/abs/10.1080/13571516.2019.1553656.

A working paper version of the paper is available freely avaliable here:

https://repository.eafit.edu.co/handle/10784/11748

BibTeX


@article{CanavireCastro,
  author = {Luis Castro Peñarrieta and Gustavo Canavire-Bacarreza},
  title = {Can Intellectual Property Rights Affect Multinational Enterprises’ Entry Modes? The Chilean Case},
  journal = {International Journal of the Economics of Business},
  volume = {26},
  number = {1},
  pages = {177-198},
  year  = {2019},
  publisher = {Routledge},
  doi = {10.1080/13571516.2019.1553656},
}

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