Intellectual property rights and North-South trade: Exports vs. foreign direct investment

Quan Dong; Juan Carlos  Bárcena-Ruiz; María  Begoña Garzón

Send article

Intellectual property rights and North-South trade: Exports vs. foreign direct investment

Authors

Quan Dong South China Normal University
Juan Carlos Bárcena-Ruiz Universidad del País Vasco https://orcid.org/0000-0002-8808-2543
María Begoña Garzón Universidad del País Vasco https://orcid.org/0000-0002-5731-7581

Vol. 49 No. 2 (2022): Diciembre

Abstract

This paper examines whether a Northern firm prefers to export or to engage in FDI to serve the South. If the firm engages in FDI, its technology is imitated, and a Southern firm enters the market that may sell in both markets. The Northern firm may invest to prevent product piracy in the North. The two markets may have different sizes. We find that when the cost of preventing product piracy in the North is great enough: (i) If the Southern market is large enough the Northern firm engages in FDI, allowing piracy in its home market, and the South obtains the greater welfare; (ii) If the Southern market is small enough the Northern firm exports and the government of the South imposes a strong Intellectual Property Rights protection, attracting the Northern firm and improving the welfare of both countries.

Keywords:

Foreign direct investment, intellectual property rights (IPR), NorthSouth trade, imperfect competition

Downloads

How to Cite

Dong, Q., Bárcena-Ruiz, J. C. ., & Begoña Garzón, M. . (2022). Intellectual property rights and North-South trade: Exports vs. foreign direct investment. Estudios De Economía, 49(2), pp. 145–173. Retrieved from https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/69081