Intellectual Property-Related Preferential Trade Agreements and Offshoring to Developing Countries

Canals, Claudia and Klein, Michael A and Sener, Fuat (2021): Intellectual Property-Related Preferential Trade Agreements and Offshoring to Developing Countries.

Abstract

International standards in the protection of intellectual property rights (IPRs) are increasingly guided by bilateral and regional preferential trade agreements (PTAs). In this paper, we estimate the effect of these IP-related PTAs on US offshoring behavior in developing countries. We utilize a difference-in-difference empirical methodology that addresses several possible sources of endogeneity and exploits industry variation in the importance of IPRs to identify the effect of these PTA-induced IPR reforms. We find that IP-related PTAs are associated with a substantial increase in US offshoring in IPR-intensive industries relative to non-IPR-intensive industries. This increase occurs both within the boundaries of the multinational firm and through arm’s-length contracts with domestic firms. We do not find strong evidence for a compositional shift towards either type of offshoring. These findings provide direct empirical evidence that PTA-induced IPR reform stimulates multinational activity in developing countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Intellectual property rights; Patents; Preferential trade agreements; Offshoring; Outsourcing; Subcontracting; Multinational firms
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O34 - Intellectual Property and Intellectual Capital

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