On the effects of intellectual property rights on foreign direct investments in developing economies: a system GMM approach
Date
2016-12
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Abstract
This paper aims to examine the effects of Intellectual Property Rights (IPR)
quantity and protection quality on Foreign Direct Investment (FDI) inflows in a
panel of 79 low- and middle-income countries with average per capita real GNIs
of not more than $12,475 over the period 2000-2014, also accounting for the
existence of nonlinearities. Using the semiparametric Blundell and Bond’s [1998]
and Windmeijer’s [2005] two-step System Generalized Method of Moments
(SGMM) to obtain more asymptotically efficient estimates, address dynamic
endogeneity issues, and factor in the inclusion of nonstationary macroeconomic
variables, this paper finds that for at least half of the countries in the sample, an
improvement in IPR protection quality has a positive marginal effect on FDI
inflows. Meanwhile, per capita IPR has a negative marginal impact on FDI
inflows in more than 95% of the countries in the sample. The nonlinearity in the
per capita IPR-FDI nexus is such that increases in IPR applications would not
necessarily translate into higher FDI inflows until a minimum scale of IPR
applications is reached.
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Keywords
Intellectual Property Rights, Foreign Direct Investment, developing countries, panel data