Intellectual Property Rights and Entry into a Foreign Market: FDI vs. Joint Ventures
40 Pages Posted: 24 Jul 2006
Date Written: June 2006
We study the effect of the intellectual property rights (IPR) regime of a host country (South) on a multinational's decision between serving a market via greenfield foreign direct investment to avoid the exposure of its technology or entering a joint venture (JV) with a local firm, which allows R&D spillovers under imperfect IPRs. JV is the equilibrium market structure when R&D intensity is moderate and IPRs strong. The South can gain from increased IPR protection by encouraging a JV, whereas policies to limit foreign ownership in a JV gain importance in technology intensive industries as complementary policies to strong IPRs.
Keywords: Joint Ventures, Intellectual Property Rights, Technology Transfer, R&D Spillovers, FDI Policy
JEL Classification: O34, F23, O32, F13, L24, O24
Suggested Citation: Suggested Citation