Intellectual Property Rights, Foreign Direct Investment and Economic Growth

Palaniaandy, Ayappan and Chin, Lee (2018): Intellectual Property Rights, Foreign Direct Investment and Economic Growth. Published in: International Journal of Economics and Management , Vol. a2, No. S2 (2018): pp. 535-548.

Abstract

The objective of this study is to investigate the moderating role of IPR on the impact of FDI inflows on economic growth. By include an interaction term for FDI and IPR in each model, Two-step System GMM was applied for three proxies of IPR, namely patent, trademark and industrial design on a panel of 103 countries from 1998 to 2013. The result shows that interaction between FDI-trademark and FDI-design obtained a positive and significant result towards economic growth. It can be concluded that countries with high IPR’s could enhance their economic growth via higher inflows of FDI. A strict enforcement of IPR is vital in ensuring positive impact on economic growth as investors preferably place the FDI in a safe and secure nation that promises enforcement of law against imitation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic growth; foreign direct investment; industrial design; intellectual property rights; patent
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development

References

Abida, S.A. (2013) Foreign direct investment, financial development and economic growth: empirical evidence from North African countries. Journal of International and Global Economic Studies. 6(1), pp. 1-13.

Aleksynska, M., Gaisford, J. and Kerr, W. (2003) Foreign Direct Investment and Growth in Transition Economies. MPRA Paper 7668, University Library of Munich, Germany, revised Dec 2003.

Alexiou, C., Nellis, J. and Papageorgiadis, N. (2016) The effect of patent enforcement strength and FDI on economic growth. Multinational Business Review. 24(4), pp. 334-353.

Alfaro, L., Chanda, A., Kalemli-Ozcan, S. and Sayek, S. (2004) FDI and economic growth: the role of local financial markets. Journal of International Economics. 64, pp. 89-112.

Ali, G. (2015) Gross Fixed Capital Formation & Economic Growth Of Pakistan. Journal of Research in Humanities, Arts and Literature Applied. 1(2), pp. 21-30.

Ang, J.B. (2008) Determinants of foreign direct investment in Malaysia. Journal of Policy Modeling. 30, pp. 185-189.

Arellano, M. and Bond, S. (1991) Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. Review of Economic Studies. 58(2), pp. 277-297.

Arellano, M. and Bover, O. (1995) Another look at the instrumental variable estimation of error-components models. Journal of Econometrics. 68(1), pp. 29-51.

Asiedu, E. (2002) On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?. World Development. 30(1), pp. 107-119.

Athukorala. (2003) The Impact of Foreign Direct Investment on Economic Growth in Sri Lanka. Achievements and Policy Option in W.D Lakshman (eds) Dilemmas of Development. pp. 386-421 .

Azman-Saini, W., Baharumshah, A.Z. and Law, A.S. (2010)Foreign direct investment, economic freedom and economic growth: International evidence. Economic Modelling. 27(5), pp. 1079-1089.

Bal, D.P., Dash, D.P. and Subhasish, B. (2016) The Effects of Capital Formation on Economic Growth in India: Evidence from ARDL-bound Testing Approach. Global Business Review. 17(6), pp. 1388-1400.

Barro, R.J. and Lee, J.W. (2010) A New Data Set of Educational Attainment in the World, 1950-2010. Journal of Development Economics, Elsevier. 104(C), pp. 184-198.

Bellak, C. (2004) How Domestic and Foreign Firms Differ and Why Does it Matter?. Journal of Economic Surveys. 18(4), pp. 483–514.

Berthélemy, J.C. and Démurger, S. (2000) Foreign direct investment and economic growth: theory and application to China. Review of Development Economics. 4(2), pp. 140-155.

Bevan, A.A. and Estrin, S. (2004) The determinants of foreign direct investment into European transition economies. Journal of Comparative Economics. 32, pp. 775-787.

Blundell, R. and Bond, S. (1998) Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics. 87(1), pp. 115-143.

Borensztein, E., Gregorio, J.D. and Lee, J.W. (1998) How does foreign direct investment affect economic growth?. Journal of International Economics. 45, pp. 115-135.

Bornschier, V., Chase-Dunn, C. and Rubinson, A.R. (1978) Cross-national evidence of the effects of foreign investment and aid on economic growth and inequality: A survey of findings and a reanalysis. American Journal of Sociology. 84(3), pp. 651-683.

Calvo, M.B. and Robles, B.S. (2003) Foreign Direct Investment, Economic Freedom and Growth: New Evidence from Latin-America. European Journal of Political Economy. 19, pp. 529-545.

Carkovic, M. and Levine, R. (2002) Does foreign direct investment accelerate growth?. SSRN Electronic Journal, pp. 1-23.

Cela, M. (2016) Intellectual Property And Economic Growth: A Review Of Empirical Studies. International Journal of Economics, Commerce and Management. 4(2), pp. 774-782.

Choe, J.I. (2003) Do Foreign Direct Investment and Gross Domestic Investment Promote economic growth?. Review of Development Economics. 7(1), pp. 44-57.

Durham, J.B. (2004) Absorptive capacityand the effects of foreign direct investment and equity foreign portfolio investment on economic growth. European Economic Review. 48 , pp. 285-306.

Fan, E.X. (2002) Technological Spillovers From Foreign Direct Investment: A Survey. ERD Working Paper. 33, pp. 1-28.

Fedderke, J.W. and Romm, A.T. (2006) Growth impact and determinants of foreign direct investment into South Africa, 1956-2003. Economic Modelling. 23(5), pp. 738-760.

Findlay, R. (1978) Relative Backwardnes, Direct Foreign Investment and the Transfer of Technology: A Simple Dynamic Model. The Quarterly Journal of Economics. 92(1), pp. 1-16.

Frandsen, L.L. (2015) Foreign Direct Investment and Property Protection in Brazil. Copenhagen Business School, pp. 1-93.

Fry, M.J. (1993) Foreign direct investment in a macroeconomic framework: finance, efficiency, incentives and distortions. Policy Research, Working Paper ; WPS 1141. Washington, DC: World Bank.

Gibescu, O.M. (2010) Does the gross fixed capital formation represent a factor for supporting the economic growth?. MPRA Paper. 50135.

Gould, D. and Gruben, W. (1996) The role of intellectual property rights in economic growth. Journal of Development Economics. 48(2), pp. 323-350.

Haan, J.D., Lundström, S. and Sturm, J.E. (2006)Market-oriented institutions and policies and economic growth: A critical survey. Journal of Economic Surveys. 20(2), pp. 157-191.

Hall B.H. (2014) Does patent protection help or hinder technology transfer?. in: Intellectual Property for Economic Development. Edward Elgar Publishing, pp. 11-32.

Holtz-Eakin, D., Newey, W. and Rosen, H.S. (1988) Estimating Vector Autoregressions with Panel Data. Econometrica. 56(6) , pp. 1371-1395.

Hsiao, F.S. and Hsiao, M.C.W. (2006) FDI, exports and GDP in East and Southeast Asia—Panel data versus time-series causality analyses. Journal of Asian Economics. 17(6), pp.1082-1106.

Hussain, M. (2005) Inflation and Growth: Estimation of Threshold Point for Pakistan. Pakistan Business Review. 17(3), pp. 1-15.

Hussain, S. and Malik, S. (2011) Inflation and Economic Growth: Evidence from Pakistan. International Journal of Economics and Finance. 3(5), pp. 262-276.

Jallab, M.S., Gbakou, M.B. and Sandrett, R. (2008) Foreign direct investment, macroeconomic instability and economic growth in MENA countries. CNRS Working Paper. 17.

Kashcheeva, M. (2013) The role of foreign direct investment in the relation between intellectual property rights and growth. Oxford Economic Papers. 65(3), pp. 699-720.

Kotrajaras (2010) Foreign Direct Investment and Economic Growth: A Comparative Study among East Asian Countries. Applied Economics Journal. 17(2), pp. 12-26.

Lee, H.Y., Ricci, L. and Rigobon, R. (2004) Once Again, is Openness Good for Growth?. Journal of Development Economics. 75, pp. 451-472.

Lee, J.Y. and Mansfield, E. (1996) Intellectual Property Protection and U.S. Foreign Direct Investment. The Review of Economics and Statistics. 78(2), pp. 181-86.

Lim, E.G. (2001) Determinants of and the Relation Between, Foreign Direct Investment and Growth; A Summary of the Recent Literature. IMF Working Papers 01/175, International Monetary Fund, pp. 1-28.

Mallik, G. and Chowdhury, A. (2001) Inflation And Economic Growth: Evidence From Four South Asian Countries. Asia-Pacific Development Journal. 8(1), pp. 123-135.

Mankiw, N.G., Romer, D. and Weil, D.N. (1992) A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics. 107 (2), pp. 407-437.

Maskus, K. (1998) Strengthening Intellectual Property Rights in Asia: Implications for Australia. Australian Economic Papers. 37(3), pp. 346-361.

McCallum, B.T. (1996) Neoclassical vs. Endogenous Growth Analysis: An Overview. NBER Working Paper (5844), pp. 41-71. Mello, L.R. (1997)Foreign direct investment in developing countries and growth: A selective survey. The Journal of Development Studies. 34(1), pp. 1-34.

Mello, L.R. (1999) Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data. Oxford Economic Papers. 51, pp. 133-151.

Melnyk, L., Kubatko, O. and Pysarenko, S. (2014) The impact of foreign direct investment on economic growth: case of post communism transition economies. Problems and Perspectives in Management. 12(1), pp. 17-24.

Mohamed, M.R., Kaliappan, S.R., Ismail, N.W. and Azman-Saini, W.N. (2014) Impact of foreign aid and foreign direct investment on economic growth: evidence from Sub-Saharan African countries. Jurnal Ekonomi Malaysia. 48(1), pp. 63-73.

Mohamed, M.R., Singh, K.S. and Liew, C.Y. (2013) Impact of foreign direct investment & domestic investment on economic growth of Malaysia. Malaysian Journal of Economic Studies. 50(1), pp. 21-35.

Narwal, K.P., Soriya, S. and Ruhee. (2014) Is FDI driving Intellectual Capital: A panel data analysis. Asian Journal of Management Research. 4(3), pp. 388-403.

Nistor, P. (2014) FDI and economic growth, the case of Romania. Procedia Economics and Finance. 15, pp. 577-582 .

Ofili, O.U. (2014) Intellectual Property Rights Protection and Economic Development: The Case of Nigeria. European Scientific Journal. pp. 1-145.

Park, W.G. and Ginarte, J.C. (1997) Intellectual Property Rights and Economic Growth. Contemporary Economic Policy. 15(3), pp. 51-61.

Park, W.G. and Lippoldt, D.C. (2008) Technology Transfer And The Economic Implications Of The Strengthening Of Intellectual Property Rights In Developing Countries. OECD Trade Policy, Working Paper (62).

Prasanna and Gopakumar (2010) An Empirical Analysis of Inflation and Economic Growth in India. International Journal of Sustainable Development. 15(2), pp. 4-5.

Rapp, R.T. and Rozek, R.P. (1990) Benefits and Costs of Intellectual Property Protection in Developing Countries. Journal of World Trade. 24(5), pp. 75-102.

Romer, P. (1990) Endogenous Technological Change. Journal of Political Economy. 98(5), pp. 71-102.

Roodman, D. (2009) A Note on the Theme of Too Many Instruments. Oxford Bulletin of Economics and Statistics. 71, pp. 135–158.

Sargan, J.D. (1958) The Estimation of Economic Relationships using Instrumental Variables. Econometrica. 26(3), pp. 393-415.

Sattar, A. and Mahmood, T. (2011) Intellectual Property Rights And Economic Growth: Evidences From High, Middle And Low Income Countries. Pakistan Economic and Social Review. 49(2) , pp. 163-186.

Soumia, Z. and Abderrezzak, B. (2013) The determinants of foreign direct investment and their impact on growth: Panel data analysis for AMU countries. International Journal of Innovation and Applied Studies. 2(3), pp. 300-313.

Sweidan, O.D. (2004) Does Inflation Harm Economic Growth In Jordan? An Econometric Analysis For The Period 1970-2000. International Journal of Applied Econometrics and Quantitative Studies. 1(2), pp. 41-66.

Wang, J.Y. and Blomstrom, M. (1992) Foreign Investment and Technology Transfer. European Economic Review. 36, pp. 137-155.

Windmeijer, F. (2005) A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics. 126(1), pp. 25-51.

Xu, B. and Chiang, E. (2005) Trade, Patents and International Technology Diffusion. Journal of International Trade and Economic Development. 14(1), pp. 115–135.

Zouhaier, H. and Fatma, M. (2014) Foreign direct investment, intellectual property rights and economic growth: A panel study for Arabic countries. International Journal of Economics and Finance. 6(5), pp. 56-63.