Intellectual Property Rights and Entry into a Foreign Market: FDI versus Joint Ventures |
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| Authors: | Dermot Leahy Alireza Naghavi |
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| Affiliation: | 1. Department of Economics, Finance and Accounting, National University of Ireland, Maynooth, Co. Kildare, Ireland;2. University of Bologna, Piazza Scaravilli 2, 40126 Bologna, Italy;3. The authors are grateful for comments and suggestions by an anonymous referee, which helped us to improve our paper substantially. Dermot Leahy also acknowledges the support of the Science Foundation Ireland Research Frontiers Programme (Grant MAT 017). |
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| Abstract: | 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 a North–South 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 because it encourages a JV, whereas policies to limit foreign ownership in a JV gain importance in technology‐intensive industries as complementary policies to strong IPRs. |
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