Innovation and Intellectual Property Rights in a Product‐cycle Model of Skills Accumulation

This paper examines the effects of stronger intellectual property rights protection in the South based on a North–South general‐equilibrium model with foreign direct investment (FDI). Two types of innovation are considered – innovation targeting all products and innovation targeting only imitated products. We show that for both types of innovation, there will be increases in the innovation rate and Northern wage inequality and a decrease in the proportion of Northern unskilled labor if imitation intensity is sufficiently low. As regards the pattern of production, the extent of FDI will increase while the extent of Northern production and Southern production will decrease.     

Intellectual property rights and quality improvement

This paper explores why theories about the effects of intellectual property rights (IPR) protection on foreign direct investment (FDI) and innovation have reached mixed conclusions. In our model, Northern firms innovate to improve the quality of existing products and may later shift production to the South through FDI. Southern firms may then imitate the products of multinationals. We find that imitation can increase FDI and innovation for quality improvements, whereas the opposite occurs when innovators develop new varieties. Hence, stronger IPR protection, by reducing imitation, may shift innovation away from improvements in existing products toward development of new products.     

Foreign Direct Investment and the Incentives to Innovate and Imitate*

We propose a new channel of FDI spillovers on domestic firms, which operates through imitation of original products. Domestic heterogeneous firms may not introduce any new products, introduce a new product line (innovate), or develop a variety that is a close substitute to an existing product line (imitate). The presence of foreign firms generates incentives for imitation because they introduce original products that are vertically differentiated from domestic products. Using firm‐level panel data for China, we find that increased FDI presence in a given industry leads to more imitation, but not necessarily more innovation, by domestic firms.     

Intellectual property rights and skills accumulation: A product-cycle model of FDI and outsourcing

This study investigates the effects of stronger intellectual property rights (IPR) protection in the South on innovation, skills accumulation, wage inequality, and patterns of production based on a North–South general-equilibrium model with foreign direct investment (FDI) and international outsourcing. We find that stronger Southern IPR protection raises the extent of outsourcing and reduces the extent of FDI. This increases the proportion of unskilled Southerners and mitigates Southern wage inequality. In the North, stronger Southern IPR protection raises the proportion of skilled Northerners and wage inequality. The effects of international specialization, R&D cost, and Northern population are also examined.     

Multinationals, Endogenous Growth, and Technological Spillovers: Theory and Evidence*

FDI has received surprisingly little attention in theoretical and empirical work on openness and growth. This paper presents a theoretical growth model where MNCs directly affect the endogenous growth rate via technological spillovers. This is novel since other endogenous growth models with MNCs, e.g. the Grossman–Helpman model, assume away the knowledge‐spillovers aspect of FDI. We also present econometric evidence (using industry‐level data from seven OECD nations) that broadly supports the model. Specifically, we find industry‐level scale effects and international knowledge spillovers that are unrelated to FDI, but we also find that bilateral spillovers are boosted by bilateral FDI.     

Optimum tariffs and patent length in a model of North–South technology transfer

We study a developing country's choice of optimum tariffs and patent length in a theoretical model of trade and technology transfer. A Northern firm chooses whether to export or produce a new good in a Southern country. In the absence of patent protection, a high tariff is required to induce FDI. This reduces Southern welfare when the good is imported. The Southern government can combine a positive patent length with tariffs to reduce this loss and induce FDI. Thus Southern countries may have an incentive to protect patents, although never to the same extent as Northern countries.     

Can Countries with Severe Labor Market Frictions Gain from Globalization?

The interaction between increased Southern trade integration (globalization) and labor market frictions is analyzed in a dynamic general-equilibrium North–South nonscale growth model with endogenous Northern innovation and endogenous Southern imitation. The qualitative employment, growth, and relative-wage effects of globalization are shown to depend crucially on the degree of Northern labor market frictions. I demonstrate that only Northern countries with particularly large labor market adjustment costs for both firms and workers benefit from globalization in terms of permanently lower unemployment, temporarily faster growth, and permanently higher wages. This is because of the resulting general-equilibrium feedback effects of Northern labor market frictions that deter Southern imitation incentives. The result does not imply the recommendation to increase Northern labor market rigidities, but it challenges the common belief that labor market flexibility helps Northern countries to better adjust to the "globalization threat" coming from the South.     

Wage bargaining,trade and growth

We construct a North-South product-cycle model of trade with fully-endogenous growth and union wage bargaining. Economic growth is driven by Northern entrepreneurs who conduct R&D to innovate higher quality products. Northern production technologies can leak to the South upon successful imitation. The North has two sectors: a tradable industrial goods sector (manufacturing) where wages are determined via a bargaining process and a non-tradable sector (services) where wages are flexible. The South has only a tradable industrial goods sector where wages are flexible.We find that unilateral Northern trade liberalization, in the form of lower Northern tariffs on industrial goods, increases the rate of innovation but decreases both the bargained wage in the industrial sector and the flexible wage in the service sector. The wage effects are relative to the Southern wage rate. We also consider a variant of the model with Northern unemployment, driven by a binding minimum wage in the non-tradable service sector. In this case, Northern tariff cuts decrease the innovation rate and the bargained wage rate. In addition, the Northern unemployment rate increases. The model thus highlights the role of labor market institutions in determining the growth and labor market effects of tariff reductions. We also study the effects of unilateral Southern trade liberalization.     

南方最优知识产权保护水平与南方企业自主创新

构建了一个扩展的南北贸易模型,讨论了南方知识产权保护的决定因素及其对南北双方福利的影响。在模型中,南方政府内生决定知识产权保护水平,北方厂商内生决定研发投资水平和市场竞争策略,南方厂商内生决定自主创新或模仿。研究发现:南方的最优知识产权保护水平与北方存在差异;当南方厂商模仿北方厂商的技术时,南方执行最严格的知识产权保护对北方福利和南方福利都造成损害;当南方厂商的创新效率较高时,严格的知识产权保护能激励南方厂商进行自主创新、改善南方福利。     

Product sophistication and spillovers from foreign direct investment

Foreign direct investment (FDI) in developing countries is often associated with higher economic growth due to knowledge and technology spillovers to local firms. One way that FDI speeds up growth is by facilitating the manufacturing of more sophisticated products by local firms. So far, there is a lack of firm‐level evidence how the presence of multinational firms affects the product sophistication of firms in a developing country. The aim of this paper is to fill this gap. We compile an extensive firm–product‐level data set of Indian manufacturing firms, which we complement with information on product sophistication and spillovers from FDI. We then explore different channels through which spillovers from multinationals to local Indian firms foster the manufacturing of sophisticated products. We find evidence that spillovers through supplier linkages strongly increase the manufacturing of sophisticated products in India.     

Innovation,imitation and multinationalisation in a North–South model: a theoretical note

We consider a dynamic general equilibrium product variety model of international product cycle with endogenous rate of imitation in the South; and find that a policy of strengthening intellectual property rights (IPR) protection in the South lowers the rate of product innovation, rate of multinationalisation and South–North relative wage if multinationalisation [or, foreign direct investment (FDI)] is the channel of production transfer. These results are significantly different from those obtained in the exogenous imitation model of Lai (J Dev Econ 55(1): 133–153, 1998). So a stronger IPR protection policy adopted by the South may not be interpreted as an incentive to encourage Northern FDI in the South and to raise the rate of innovation in the North.      

Endogenous Imitation and Technology Absorption in a Model of North–South Trade

Abstract

This paper considers the transfer of technology from the North to the South that occurs through trade in high-technology goods and explicitly models the ‘reverse-engineering’ process that allows the South to assimilate new technologies. A key finding of this study is that the South's rate of growth is dictated by the size of the country's human capital, which determines its absorptive capacity and its ability to assimilate knowledge from the North. We find that while a Southern country that is poor in human capital can only imitate, Southern countries that possess sufficiently large human capital endowments, beyond a certain threshold, signal the onset of innovation. We also find that the North enjoys a higher rate of innovation and growth with trade than without. North's gains are the highest when it trades with a human-capital ‘poor’ South, because imitation increases South's demand for Northern intermediates. But trade with the Southern countries that are human capital rich (and therefore involved in innovation), dampens their demand for Northern imports, adversely affecting North's growth. The model predicts growth convergence between the North and a South that is well passed the threshold for innovation.     

The Growth Effects of National Patent Policies*

We construct a two‐country (innovative North and imitating South) model of product‐cycle trade, fully endogenous Schumpeterian growth, and national patent policies. A move towards harmonization based on stronger Southern intellectual property rights (IPR) protection accelerates the long‐run global rates of innovation and growth, reduces the North–South wage gap, and has an ambiguous effect on the rate of international technology transfer. Patent harmonization constitutes a suboptimal global‐growth policy. However, if the global economy is governed by a common patent policy regime, then stronger global IPR protection: (a) increases the rates of global innovation and growth; (b) accelerates the rate of international technology transfer; and (c) has no impact on the North–South wage gap.     

Spillover effects of FDI inflows on output growth: An analysis of aggregate and disaggregated FDI inflows of 13 MENA economies

This paper examines the effect of foreign direct investment (FDI) inflows on overall growth, as well as its sector-specific spillovers in the Middle Eastern and North African region during the period from 2000 to 2020. Our major innovation is our ability to disaggregate FDI into primary, secondary and tertiary and examine their individual impact on growth, as well as their sector-specific spillovers by using dynamic panel GMM methodology. We find prima facie evidence that total FDI significantly stimulates growth. However, when we turn to the disaggregated FDI data, primary sector FDI adversely affects the gross domestic product (GDP) growth in the service sector and overall GDP growth. On the other hand, secondary FDI has a ‘double-edged’ effect, benefiting its own sector (the service sector's GDP growth), but not other sectors. In contrast, service sector FDI stimulates GDP growth in mining, manufacturing and service sectors, thereby enhancing overall economic growth. Our findings have important policy implications regarding the incentives provided by governments to encourage FDI, which need to be fine-tuned to attract certain types of FDI (tertiary), with less focus on the primary sector     

The impact of foreign direct investment on innovation: Evidence from patent filings and citations in China

This paper studies how foreign direct investment (FDI) affects innovation in the host country, using matched firm-level patent data of Chinese firms. The data contain multidimensional information about patent counts and citations, which, together with an identification strategy based on Lu et al. (2017), allows us to measure innovation comprehensively and to uncover the causal relationship. Our empirical analysis shows that FDI has positive intra-industry effects on the quantity and quality of innovation, as well as radical innovation, by Chinese firms. We show that these positive effects are driven by increases in competition, rather than by knowledge spillovers from FDI which is measured by patent citations between domestic firms and foreign invested enterprises (FIEs). We further investigate the inter-industry effects of FDI and find that FDI has positive vertical effects on innovation in upstream sectors through backward knowledge spillovers.     

Origin of FDI and Intra‐Industry Domestic Spillovers: The Case of Greek and European FDI in Bulgaria

This paper uses firm‐level data to assess the horizontal impact of foreign firm ownership on domestic productivity in Bulgaria. We identify a theoretical tradeoff between technological distance (of domestic versus foreign firms) and internalization capacity (of spillovers) and examine the extent to which this is reflected in the impact on the domestic economy of different types and origins of FDI. Emphasis is placed upon the effects of Greek FDI, which is known to be of a distinctively “regional” character. We find that Greek FDI produces significantly larger positive spillovers, which appear more suitable for the Bulgarian context of transition and economic restructuring. We also unveil some notable “hysteresis” and “technology bias” effects for FDI spillovers of all origins, as well as some country‐specific ownership‐structure and threshold effects.     

知识溢出理论的研究进展与述评

知识溢出的提出最早可以追溯到Marshall对外部性的讨论,自新经济地理理论以来,知识溢出更成为了近年来研究区域经济学增长、产业集群创新等领域不可缺少的变量。首先,通过回顾国内外学者对知识溢出的研究,发现知识的非竞争性和部分排他性是知识溢出现象发生的根本原因,产业内知识溢出和产业间知识溢出在产业发展的不同阶段具有程度各异的影响;其次,因地理距离和社会距离的存在,限制了局部区域知识的外溢,知识溢出具有空间局域性特征。在一定范围内,人力资本流动、商品贸易、FDI、合作研发、非正式交流等活动均成为了知识溢出的途径。尽管知识溢出是无意识的行为,但知识在流动中留下了可追溯的痕迹,并可通过知识生产函数法、专利引用文献法、C-H模型进行测量。最后,文中还展望了知识溢出在解释企业创新决策行为、产业集群创新、区域经济增长等方面的应用,并指出下一个研究方向。     

A Schumpeterian North–South Growth Model of Trade and Wage Inequality*

The paper presents a dynamic general‐equilibrium model of interindustry North–South trade that is used to analyze the effects of trade liberalization on the Northern wage distribution. Both countries have a low‐tech sector where consumer goods of constant quality are produced by use of unskilled labor. The North also has a high‐tech sector that employs skilled labor and features a quality‐ladder model structure with endogenous growth. Both innovation and skill acquisition rates are endogenously determined. In a balanced trade equilibrium, it is found that Southern‐originated (Northern‐originated) trade liberalization leads to an increase (decrease) in Northern wage inequality both between skilled and unskilled workers and within the group of skilled workers. The endogenous change in the Southern terms of trade determines the direction of change in unskilled wages in both the North and the South.     

Competing to Outsource in the South

This paper analyzes foreign direct investment (FDI) competition in a three‐country framework: two Northern countries and one Southern country. We have in mind the competition of Airbus and Boeing in a developing country. The host‐country government endogenizes tariffs, while Airbus and Boeing choose domestic output and FDI. Wages and employment in the home countries are negotiated. We find that in the unique equilibrium, both Airbus and Boeing compete to undertake FDI in the developing country. This arises because the host country can play off the multinationals, which in turn stems from three factors: (a) oligopolistic rivalry; (b) quid pro quo FDI; (c) strategic outsourcing—FDI drives down the union wages at home if the host‐country wage is sufficiently low. However, if the host‐country wage is sufficiently high, the union wage increases under FDI. In such cases, FDI competition benefits the multinationals, the labor unions, as well as the host country.     

ARE THERE PRODUCTIVITY SPILLOVERS FROM FOREIGN DIRECT INVESTMENT IN CHINA?

We review previous literature on productivity spillovers of foreign direct investment (FDI) in China and conduct our own analysis using a firm‐level data set from a World Bank survey. We find that the evidence of FDI spillovers on the productivity of Chinese domestic firms is mixed, with many positive results largely due to aggregation bias or failure to control for endogeneity of FDI. Attempting over 6000 specifications that take into account forward and backward linkages, we fail to find evidence of systematic positive productivity spillovers from FDI in China.