International transactions in intellectual property and developing countries

International Journal of Technology Management

Volumn 19, Issue 1, 2000, Pages 35-56

  Primo Braga, Carlos A ^a,b   Fink, Carsten ^a,c,d  

^a WORLD BANK GROUP   (United States)

^b WORLD BANK   (United States)

^c TechNet ^*

^d UNIVERSITY OF HEIDELBERG   (Germany)

Author keywords

[No Author keywords available]

Indexed keywords

DEVELOPING COUNTRIES; INTERNATIONAL TRADE; TECHNOLOGICAL FORECASTING; TECHNOLOGY TRANSFER;

FOREIGN DIRECT INVESTMENT; INTELLECTUAL PROPERTY RIGHTS; KNOWLEDGE TRANSFER; TECHNOLOGY LICENSING;

INTELLECTUAL PROPERTY;

EID: 0033905296     PISSN: 02675730     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (63)

1. For a review of the TRIPS Agreement and its economic implications for developing countries, see Primo Braga [2].
2. Primo Braga, C.A. (1996) 'Trade-related intellectual property issues: the Uruguay round agreement and its economic implications', in W. Martin and L.A. Winters eds, The Uruguay Round and the Developing Economies, World Bank Discussion Paper No. 307, Washington, DC, The World Bank, pp.381-411.
3. There are other forms of international business such as joint ventures, franchising agreements, or build-operate-transfer schemes. However, most of these arrangements can be considered as intermediate forms between foreign production and licensing, i.e. between perfect internalization and perfect externalization.
4. Dunning, J.H. (1979) 'Explaining changing patterns of international production: in defence of the eclectic theory', Oxford Bulletin of Economics and Statistics, Vol. 41, pp.269-295.
5. Dunning, J.H. (1981) 'Explaining the international direct investment position of countries: towards a dynamic or developmental approach', Weltwirtschaftliches Archiv, Vol. 117, pp.30-64.
6. For a more detailed discussion of the role of IPRs in promoting local R&D in developing countries see Primo Braga and Fink [21].
7. Primo Braga, C.A. and Fink, C. (1998) 'The relationship between intellectual property rights and foreign direct investment', 9. Duke Journal of Comparative and International Law p. 163.
8. In 1995, for example, of the approximately 35,400 patents granted in developing countries (excluding the countries of Central and Eastern Europe and the Commonwealth of Independent States), more than 28,000 (82.5%) were awarded to foreign residents. See World Intellectual Property Organization (www.wipo.org).
9. For a review of some of the options developing countries have in reforming their IPRs regimes, see Reichmann [10].
10. Reichman, J.H. (1993) 'Implications of the draft TRIPS agreement for developing countries as competitors in an integrated world market', Discussion Paper No. 73, Geneva, UNCTAD.
11. Maskus, K.E. and Penubarti, M. (1995) 'How trade-related are intellectual property rights?', Journal of International Economics, Vol. 39, pp.227-248.
12. Ferrantino, M.J., (1993) 'The effect of intellectual property rights on international trade and investment', Weltwirtschaftliches Archiv, Vol. 129, pp.300-331.
13. The exhaustion doctrine addresses the exclusive rights of title-holders after first distribution of the protected good. National exhaustion of rights entitles an intellectual property owner to prevent parallel imports of his product into the national territories of its first distribution. In contrast, international exhaustion of rights signifies that the title-holder loses his exclusive right after first distribution of the product, thus allowing parallel imports. See Yusuf and von Hase [14].
14. Yusuf, A.A. and von Hase, A.M. (1992) 'Intellectual property protection and international trade: exhaustion of rights revisited', World Competition: Law and Economics Review, Vol. 16, No. 1, pp.115-131.
15. Rapp, R.T. and Rozek, R.P. (1990) 'Benefits and costs of intellectual property protection in developing countries', Working Paper No. 3, Washington, DC, National Economic Research Associates, Inc.
16. United States Chamber of Commerce (1987) Guidelines for Standards for the Protection and Enforcement of Intellectual Property Rights, Washington, DC.
17. Park, W.G. and Ginarte, J.C. (1996) 'Determinants of intellectual property rights: a cross-national study', mimeo.
18. Mansfield, E. (1994) 'Intellectual property protection, foreign direct investment and technology transfer', IFC Discussion Paper No. 19, Washington, DC, The World Bank.
19. Lee, J.Y. and Mansfield, E. (1996) 'Intellectual property protection and US foreign direct investment', The Review of Economics and Statistics, Vol. 78, No. 2, pp.181-186.
20. Sherwood, R.M. (1997) 'Intellectual property systems and investment stimulation: the rating of systems in eighteen developing countries', IDEA: The Journal of Law and Technology, Vol. 37, No. 2, pp.261-370.
21. Primo Braga, C.A. and Fink, C. (1997) 'The economic justification for the grant of intellectual property rights: patterns of convergence and conflict', in F.M. Abbott and D.J. Gerber eds, Public Policy and Global Technological Integration, The Netherlands, Kluwer Academic Publishers, pp.99-121.
22. Specifically, using Ferrantino's model and the Rapp and Rozek index of patent protection, we found a significantly positive coefficient only for arm's length trade; the IPRs coefficients for intra-firm trade and establishment trade were found to be not significant. With respect to Maskus and Penubarti's model, we found the impact of IPRs on trade flows to be weaker in large developing countries and stronger in small developing countries.
23. Fink, C. and Primo Braga, C.A. (1999) 'Intellectual property rights in a gravity model of international trade flows', Policy Research Working Paper No. 2051, Washington, DC, The World Bank.
24. Non-fuel trade refers to SITC codes O through 9-3. Our definition of high technology trade is based on Primo Braga and Yeats [25].
25. Primo Braga, C.A. and Yeats, A. (1992) 'How minilateral trading arrangements may affect the Post-Uruguay round world', Policy Research Working Paper No. 974, Washington, DC, The World Bank.
26. The reason for excluding the preferential trading dummies in the probit regression was that in most cases all bilateral trade flows in a preferential trading agreement were positive. Inclusion of these variables would have lead to perfect colinearity.
27. Erzan, R., Holmes, C. and Safadi, R. (1992) 'How changes in the former CMEA area may affect international trade in manufactures', Policy Research Working Paper No. 973, Washington, DC, The World Bank.
28. In theory, country i's exports to j should be identical to country j's imports from i. In practice, however, these aggregates often differ as they are reported from different national statistical agencies.
29. For formal models see, for example, Deardorff [30] and Chin and Grossman [31]. Nogués [32], Maskus and Konan [33], Subramanian [34] and Watal [35] try to estimate these deadweight losses for the pharmaceutical industries of several developing countries.
30. Deardorff, A.V. (1992) 'Welfare effects of global patent protection', Economica, Vol. 59, pp.35-51.
31. Chin, J.C. and Grossman, G.M. (1988) 'Intellectual property rights and north-south trade', NBER Working Paper No. 2769, Cambridge, MA, National Bureau of Economic Research.
32. Nogués, J.J. (1993) 'Social costs and benefits of introducing patent protection for pharmaceutical drugs in developing countries', The Developing Economies, Vol. 31, No. 1, pp.24-53.
33. Maskus, K.E. and Eby-Konan, D. (1994) 'Trade related intellectual property rights: issues and exploratory results', in Deardorff, A.V. and Stearn, R.M., eds., Analytical and Negotiating Issues in the Global Trading System, Ann Arbor, University of Michigan Press, pp.401-446.
34. Subramanian, A. (1995) 'Putting some numbers on the TRIPS pharamceutical debate', International Journal of Technology Management, Special Issue on the Management of International Intellectual Property, Vol. 10, Nos. 2/3, pp.252-268.
35. Watal, J. (1996) 'Introducing product patents in the Indian pharmaceutical sector: implications for prices and welfare', World Competition: Law and Economics Review, Vol. 20, No. 2, pp.5-21.
36. Diwan and Rodrik [37] formally show that the South may have an incentive to protect patent rights, if the North and the South have different distributions of preferences over the range of exploitable technologies and R&D resources are scarce.
37. Diwan, I. and Rodrik, D. (1991) 'Patents, appropriate technology and north-south trade', Journal of International Economics, Vol. 30, pp.27-47.
38. Helpman, E. (1993) 'Innovation, imitation and intellectual property rights', Econometrica, Vol. 61, No. 6, pp.1247-1280.
39. This section relies on Primo Braga and Fink [7].
40. Katz, H. (1997) 'What attracts FDI', in The Global Competitiveness Report 1997, Geneva, World Economic Forum.
41. Mansfield, E. (1995) 'Intellectual property protection, direct investment and technology transfer: Germany, Japan and the United States', IFC Discussion Paper No. 27, Washington, DC, The World Bank.
42. Frischtak, C.R. (1993) 'Harmonization versus differentiation in intellectual property right regimes', in B. Wallerstein, M.E. Mogee and R.A. Schoen, eds., Global Dimensions of Intellectual Property Rights in Science and Technology, Washington, DC, National Academy Press, pp.89-106.
43. Fink, C. (1997) 'Intellectual property rights and US and German international transactions in manufacturing industries', mimeo.
44. In Tables 2 and 3, the estimated covariances between the error terms of the export and FDI regressions indicate the extent to which trade and FDI are substitutes or complements. In the US case (Table 1), the estimated covariance takes a small positive value suggesting a weakly complementary relationship between arm's length exports and establishment trade. In the German case (Table 2), the estimated covariance takes a value close to zero suggesting a nearly independent relationship between total exports and FDI stock.
45. Besides the survey index, Mansfield and Lee's explanatory variables include a measure of market size, a dummy variable for Mexico, the stock of foreign direct investment, a measure of the degree of industrialization, and a measure for openness.
46. In Primo Braga and Fink [21] we also use data on US foreign investment, relying on a larger set of countries than Lee and Mansfield and the Rapp and Rozek index of patent protection (see Box 1). Our dependent variables were total assets of US firms for total manufacturing and five manufacturing industries. Besides the Rapp and Rozek index, we used GDP and a dummy for Canada and Mexico as explanatory variables. The estimation results showed a statistically positive influence of stronger IPRs regimes with respect to manufacturing as a whole. The sectoral results were less robust, although the coefficient on the Rapp and Rozek index always showed a positive sign and was statistically significant for 'primary and fabricated metals' and 'electric and electronic equipment'. It should be noted, however, that these estimations were very tentative in that only two additional explanatory variables were used to control for other determinants of US foreign investment stocks.
47. United Nations (1993) Intellectual Property Rights and Foreign Direct Investment, Transnational Corporations and Management Division, New York: United Nations.
48. The latter view was widely accepted among policymakers in the 1970s and significantly influenced the North-South debate on the so-called 'New International Economic Order', with developing countries seeking the establishment of an 'International Code of Conduct on the Transfer of Technology' (Primo Braga [49].
49. Primo Braga, C.A. (1990) 'The developing country case for and against intellectual property protection', in W.E. Siebeck ed., Strengthening Protection of Intellectual Property in Developing Countries: A Survey of the Literature, World Bank Discussion Papers No. 112, Washington, DC, The World Bank, pp.69-87.
50. Arrow, K.J. (1962) 'Economic welfare and the allocation of resources for invention', in R.R. Nelson ed., The Rate and Direction of Inventive Activity, Princeton, Princeton University Press, pp.609-625.
51. However, this may not be necessarily true as, for example, encryption technologies and poor access to communications technologies (e.g., TV, telephone, Internet) or libraries may exclude agents from accessing information.
52. Evenson and Westphal [53] use the concepts of tacitness and circumstancial sensitivity, to explain why technologies cannot be easily copied. A technology is tacit, when the information contained in a product or in a product's blueprint or patent is not sufficient to implement the technology in question and complementary know-how is required (see David [54]). Circumstantial sensitivity describes the phenomenon whereby a technology behaves differently under different economic, social, or geographic circumstances, and needs to be adapted to the environment in which it is supposed to operate.
53. Evenson, R.E. and Westphal, L.E. (1995) 'Technological change and technology strategy', in T.N. Srinivasan and J. Behrman eds, Handbook of Development Economics, Vol. 3A, North-Holland Publishing Company, pp.2209-2299.
54. David, P.A. (1993) 'Intellectual property institutions and the panda's thumb: patents, copyrights and trade secrets in economic theory and history', in B. Wallerstein, M.E. Mogee and R.A. Schoen eds, Global Dimensions of Intellectual Property Rights in Science and Technology, Washington, DC, National Academy Press, pp. 19-61.
55. It should be noted, however, that stronger patent protection in developing countries is unlikely to lead to the disclosure of information not already available in patents published in developed countries. Northern patent databases, in turn, can be accessed by developing countries (e.g., through computer-mediated networks). On the other hand, the availability of domestic databases of foreign-owned patents in local languages could potentially stimulate the diffusion of knowledge especially among small and medium-sized firms in developing countries.
56. See, for example, Redwood [57] and Bagchi and Bhattacharya [58].
57. Redwood, H. (1994) New Horizons in India: The Consequences of Pharmaceutical Patent Protection, Oldwicks Press, Felixtowe, England.
58. Bagchi, A.K. and Bhattacharya, U.K. (1995) 'Indian patents as competitive instruments: dream and reality', Economic and Political Weekly, Vol. 30, No. 25, pp.1501-1511.
59. Export-Import Bank of India (1997) 'Pharmaceuticals and herbal medicines: a sector study', Occasional Paper No. 53, Quest Publications.
60. Gould and Gruben [62], however, argue that the degree of endogeneity may not be too severe, if one takes into account that most countries' IPRs regimes were established during or before the 1960s and the level of protection remained fairly stable since then.
61. Gould, D.M. and Gruben, W.C. (1996) 'The role of intellectual property rights in economic growth', Journal of Development Economics, Vol. 48, pp.323-350.
62. Maskus and Penubarti [11] use an instrumental variable approach to address the endogeneity problem and potential errors of measurement in the IPRs index. Their instruments are prior indicators of the level of economic development (GDP per capita, primary exports as a share of total exports, infant mortality rate, and secondary enrollment ratios), and dummy variables for former British and French colonies, for membership in Paris and Berne Conventions, and for the existence of legislative provisions for pharmaceutical and chemical product patents. However, most of these instruments tend to be strongly correlated with Maskus and Penubarti's dependent variable - bilateral imports as a share of aggregate expenditure. Hence, it is not clear to what degree Maskus and Penubarti really reduce problems related to endogeneity and potential errors of measurement.
63. United Nations (1996) World Investment Report 1996, Geneva. United Nations.