The University of Southampton
University of Southampton Institutional Repository

Does intellectual property rights protection affect UK and US outward FDI and earnings from FDI? A sectoral analysis

Does intellectual property rights protection affect UK and US outward FDI and earnings from FDI? A sectoral analysis
Does intellectual property rights protection affect UK and US outward FDI and earnings from FDI? A sectoral analysis
Purpose –Despite decades of research, the relationship between intellectual property rights (IPRs) and foreign direct investment (FDI) remains ambiguous. Using a recently developed patent enforcement index (along with a broader IPR index) and a large sectoral country-to-country FDI dataset, the authors revisit the FDI-IPR relationship by testing the impact of IPRs on UK and US outward FDI (OFDI) flows as well as earnings from outward FDI (EOFDI).

Design/methodology/approach – The authors use disaggregated data for up to 9 distinct sectors of economic activity from both the US and UK for OFDI flows and EOFDI, for a panel of up to 42 developed and developing countries over sample periods from 1998 to 2015. The authors employ a panel fixed effects (FE) approach that allows exploiting the longitudinal properties of the data using Driscoll and Kraay’s (1998) nonparametric covariance matrix estimator.

Findings – The authors do not find any consistent evidence in support of the hypothesis that countries’ strength of IPR protection or enforcement affects inward FDI, or that sector of investment matters. The results prove robust to sensitivity checks that include an alternative broader measure of IPR strength, analyses across sub-samples disaggregated according to the strength of countries’ IPRs as well as developing vs developed economies and an extended specification accounting for dynamic effects of the response of FDI to both previous investment levels and IPR (patent) protection.

Originality/value – The authors make use of the largest most granular sectoral country-to-country FDI dataset employed to date in the analysis of the FDI-IPR nexus with disaggregated data for OFDI and EOFDI across up to 9 distinct sectors of economic activity from both the US and UK The authors employ a more sophisticated measure of IPR strength, the patent index proposed by Papageorgiadis et al. (2014), which places emphasis on the effectiveness of enforcement practices as perceived by managers, together with the overall administrative effectiveness and efficiency of the national patent system.

Keywords Intellectual property rights, Patents, Foreign direct investment, Multinationals Paper type Research paper

Foreign direct investment, Intellectual property rights, Multinationals, Patents
0144-3585
De Vita, Glauco
002fc6bf-e5ed-4a13-8993-0ce5e1fc2005
Alexiou, Constantinos
729411e9-1f56-4839-bf23-222bff11f00d
Trachanas, Emmanouil
4d570d27-0a47-46e6-a333-0e66f4700b05
Luo, Yun
2ac0f228-573d-43e7-b309-1529b6f3d174
De Vita, Glauco
002fc6bf-e5ed-4a13-8993-0ce5e1fc2005
Alexiou, Constantinos
729411e9-1f56-4839-bf23-222bff11f00d
Trachanas, Emmanouil
4d570d27-0a47-46e6-a333-0e66f4700b05
Luo, Yun
2ac0f228-573d-43e7-b309-1529b6f3d174

De Vita, Glauco, Alexiou, Constantinos, Trachanas, Emmanouil and Luo, Yun (2021) Does intellectual property rights protection affect UK and US outward FDI and earnings from FDI? A sectoral analysis. Journal of Economic Studies. (doi:10.1108/JES-09-2021-0462).

Record type: Article

Abstract

Purpose –Despite decades of research, the relationship between intellectual property rights (IPRs) and foreign direct investment (FDI) remains ambiguous. Using a recently developed patent enforcement index (along with a broader IPR index) and a large sectoral country-to-country FDI dataset, the authors revisit the FDI-IPR relationship by testing the impact of IPRs on UK and US outward FDI (OFDI) flows as well as earnings from outward FDI (EOFDI).

Design/methodology/approach – The authors use disaggregated data for up to 9 distinct sectors of economic activity from both the US and UK for OFDI flows and EOFDI, for a panel of up to 42 developed and developing countries over sample periods from 1998 to 2015. The authors employ a panel fixed effects (FE) approach that allows exploiting the longitudinal properties of the data using Driscoll and Kraay’s (1998) nonparametric covariance matrix estimator.

Findings – The authors do not find any consistent evidence in support of the hypothesis that countries’ strength of IPR protection or enforcement affects inward FDI, or that sector of investment matters. The results prove robust to sensitivity checks that include an alternative broader measure of IPR strength, analyses across sub-samples disaggregated according to the strength of countries’ IPRs as well as developing vs developed economies and an extended specification accounting for dynamic effects of the response of FDI to both previous investment levels and IPR (patent) protection.

Originality/value – The authors make use of the largest most granular sectoral country-to-country FDI dataset employed to date in the analysis of the FDI-IPR nexus with disaggregated data for OFDI and EOFDI across up to 9 distinct sectors of economic activity from both the US and UK The authors employ a more sophisticated measure of IPR strength, the patent index proposed by Papageorgiadis et al. (2014), which places emphasis on the effectiveness of enforcement practices as perceived by managers, together with the overall administrative effectiveness and efficiency of the national patent system.

Keywords Intellectual property rights, Patents, Foreign direct investment, Multinationals Paper type Research paper

Other
JES - Accepted Manuscript
Download (369kB)

More information

Accepted/In Press date: 8 November 2021
e-pub ahead of print date: 26 November 2021
Keywords: Foreign direct investment, Intellectual property rights, Multinationals, Patents

Identifiers

Local EPrints ID: 455154
URI: http://eprints.soton.ac.uk/id/eprint/455154
ISSN: 0144-3585
PURE UUID: 7950bbaa-c654-489a-a5a4-e1f72b5ff7e2
ORCID for Yun Luo: ORCID iD orcid.org/0000-0001-8409-366X

Catalogue record

Date deposited: 10 Mar 2022 20:07
Last modified: 28 Apr 2022 02:29

Export record

Altmetrics

Contributors

Author: Glauco De Vita
Author: Constantinos Alexiou
Author: Emmanouil Trachanas
Author: Yun Luo ORCID iD

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×