Intellectual property rights, international licensing and foreign direct investment

Kuang Cheng Andy Wang, Yi Jie Wang, Wen Jung Liang*

*Corresponding author for this work

Research output: Contribution to journalJournal Article peer-review

11 Scopus citations

Abstract

This paper develops a North-South trade model to examine the effect of the enforcement of intellectual property rights (IPR) in the South on inward foreign direct investment (FDI) by taking into account international licensing and the informational advantage of FDI. The focus of this paper is on the strategic influence of international licensing on the optimal entry mode of firm N. The main findings of this paper are as follows. First, the optimal entry mode for firm N in the absence of IPR protection is FDI when the innovation size is large but the variance of demand and the fixed setup cost are small, while selecting exporting otherwise. Second, the enforcement of IPR in the South can promote FDI when the innovation size is small, while discouraging FDI when the innovation size is moderate and large. Third, the enforcement of IPR protection will most likely decrease the total output and the welfare level in the South under international licensing, while the reverse may occur as a result of changing the firm N’s entry mode from FDI to exporting.

Original languageEnglish
Pages (from-to)291-305
Number of pages15
JournalAsia-Pacific Journal of Accounting and Economics
Volume23
Issue number3
DOIs
StatePublished - 02 07 2016

Bibliographical note

Publisher Copyright:
© 2016 City University of Hong Kong and National Taiwan University.

Keywords

  • IPR protection
  • entry mode
  • foreign direct investment
  • informational advantage
  • international licensing

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