Do intellectual property rights influence multinationals' manufacturing location decisions? My theoretical model indicates that countries with strong patent laws attract multinational activity, but only in sectors with relatively long product life cycles. By contrast, firms with short life-cycle technologies are insensitive, because offshore imitation is less likely to succeed before obsolescence. I document strong empirical regularities consistent with the model using a panel dataset on the global operations of US-based multinational firms and a new measure of product obsolescence. Moreover, my identification strategy allows me to isolate the causal effect of patent laws on multinational activity.
Download for free:
Working paper in 2013: http://www.ssc.wisc.edu/~kbilir/Bilir_IP_and_MNCs.pdf
ABOUT THE AUTHOR
American Economic Review
The American Economic Review is a general-interest economics journal. Established in 1911, the AER is among the nation's oldest and most respected scholarly journals in the economics profession.