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Table 6 Empirical studies of the implications of patenting on economic growth and/or foreign direct investment

From: A review of the health and economic implications of patent protection, with a specific focus on Thailand

Authors/Ref. no.

Period

Setting

Objectives

Model

Method

TDRI (2003)/[47]

2003

Thailand

The impact of Thai-US FTA on export and import

Computable General Equilibrium (CGE)

Estimating benefit from trade in goods and the benefit to the economy as a whole by matching the industries that have higher revealed comparative advantage (RCA) index

Ferrantino (1993)/[48]

1982

U.S. firm, U.S. affiliated in 45 countries

The effect of IPR on trade and investment flows

Gravity model

Using dummy (0/1) variables to reflect differences in national IPR protection schemes and control for economic risk (distance, phone, landlocked, colony and European countries), political risk (Paris Convention member, restriction to foreign firm, number of international memberships, duration of patent), labour costs, population and GDP, while dependent variables are total export, royalty fee, sales of affiliate

Markus and Penubarti (1995)/[49]

1984

28 manufacturing sectors across 77 countries

The effect of IPR protection on trade flows

Regression

Using an empirical model in which deviations of bilateral sectoral imports from anticipated levels are related to income, trade barriers, and patent laws

Braga and Fink (1999)/[53]

1989

89 countries from developed to least developed countries

The effects of increased protection on intellectual property

Gravity model

Using a gravity model of bilateral trade, foreign direct investment, and technology licensing and estimating the effects of increased protection on a cross-section of 89x88 countries. Using the index on national IPRs systems developed by Park and Ginarte (1996). Estimating the effects of explanatory variables (such as IPRs, GDP and population of both countries, geographical distance, a common border, language)

Pradhan (2007)/[51]

1970-2000

India

The effect of patent protection on pharmaceutical exports

Gravity model

Using a gravity model consisting of GDP of the importing country, distance, trading bloc dummy, price and exchange rate

Kondo (1995)/[52]

1976-1980

U.S. outward FDI in 33 countries

The effect of patent protection on FDI

Survey (for IPR index) and Multiple regression of FDI testing

Developing their own patent index including scope, patent life, and provision from weighted point survey firm. Then using control factors of GDP per capita, population, education, English language, GATT member and ICSID member.

Pfister and Deffain (2005)/[54]

1994-1995

The location choices of French firms in 17 developing countries

The role of the patent rights in the host country

A conditional logit model

The independent variable is the decision to invest in the countries. The independent variables are number of French competitors, number of subsidiaries, openness, GDP, GDP per capita, consumer price index, status of EU union, national R&D investment over GDP, education, democracy, corruption, patent protection index (Ginarte and Park index), and dummy variable of the exceeding patent protection index.

Fosfuri (2004)/[55]

four time periods:1981–1983, 1984–1987, 1988–1991, 1992–1996.

75 countries receiving investments in chemical plants during the period 1981–1996

The impact of IPRs protection compared with country risk on the determinants of international activity through wholly owned operations, joint-ventures and technology licensing,

OLS, Tobit and GLS random effect

Independent variables are income per capita, population, weighted distance of country, averaged years of schooling among the total population, (exports + imports)/GDP, global index of risk, composite index of risk (political, financial and economic), dummy variables for number of scientists and engineers per million of population, time fixed effect, and IPR index by Ginarte and Park

Nunnenkamp and Spatz (2004)/[56]

1995 and 2000

U.S. FDI and US FDI in industrial level in 166 countries

The relationship between IPR protection and overall FDI and by industry

Gravity model regression

Finding FDI determinants through a regression of FDI on GDP per capita, population, distance to U.S., the cost of living abroad, average years of schooling and IPRs index using Ginarte-Park for the year 1995 and World Economic Freedom (WEF) index for the year 2000. Testing the industry characteristics by adding industry dummies in the previous independent variable set.

Lee and Mansfield (1996)/[57]

1991

U.S. firms and investment in 14 developingcountries

The effect of IPR protection level on U.S. firm’s FDI and the role of IPRs protection in chemical industry

1. Survey for IPRs protection perception 2. OLS regression 3. Tobit model for chemical industry

Surveying perceived weakness of IPR protection from 94 US firms and developing two regression models to find the influence of IPR protection level for overall US FDI and level of technology transfer in the chemical industry. For OLS of overall US FDI, independent variables are weakness of IPR, size of market, with control for firm specific and country specific, IPR index, market size, dummy for Mexico, FDI in previous year, degree of industrialization, openness, and time dummy variables. For Tobit model from 14 US chemical industries, the independent variables are the percentage of firms that felt weakness of IPR protection, GDP, and dummy variables for firms, while the dependent variable is the percentage of firms that will invest in facilities for sales and distribution.

An et al. (2008)/[58]

1995 (for FDI or licensing) and 1994 (for exporting)

U.S. FDI in 52 manufacturing industries invested in 62 host countries

To examine the effect of strengthening IPR protection on the mode of technology transfer: exporting, FDI or licensing

A multinomial logit model of three mode of entry choices

The explanatory variables covering national characteristics, GDP, absorptive capacity, distance, cultural distance (English and index developed by authors), FDI fixed cost (economic freedom index), market capitalisation and investment cost index, and IPR index from Ginarte and Park 1990. The industry characteristics variables are industry R&D intensity and capital intensity (the ratio of total real capital stock to total industry sales).

Maskus (1998)/[59]

1989-1992

U.S. FDI in 46 countries

The effect of patent protection on U.S. patent applications filed in host country, total sales of foreign affiliates of U.S. parents, U.S. exports shipped to affiliates and total assets, foreign affiliates of U.S. parents

Seemingly Unrelated Regression

Estimating a simultaneous set of equations to capture these joint impacts, controlling for market size, tariff protection, the level of local R&D by affiliates, distance from the US, investment incentives (proportion of affiliates receiving tax concession numbers in host country and in any of the countries) and disincentives (proportion of affiliates that employ a minimum amount of local personnel no. in host country and in any of the countries.

Javorcik (2004)/[60]

1995

1,405 global firms investing in Eastern European countries

The impact of intellectual property protection on the volume of FDI

Survey and Probit model

A questionnaire of decision to invest in any country and mode of entry was developed. Using a Tobit regression of the decision and mode of entry on GDP per capita, population, corporate tax rate, legal effectiveness, corruption, privatization, openness, the overall progress in reform, effectiveness of the legal system, corruption level, privatization policies and openness to trade. For testing the mode of entry, the author included firm specific variables such as firm sales, R&D outlays as a percentage of net sales, selling, general & administrative expenses as a percentage of net sales, the number of four-digit SIC codes describing a firm’s activities and a dummy variable of each investor’s regional experience in the region before 1989.

Du et al. (2008)/[61]

1993-2001

6,288 US firms investing in various regions of China

The impacts of four economic institutions variables, including property rights protection, the degree of government intervention in business operations, the degree of government corruption and contract enforcement, on the location choice of foreign direct investment

Discrete choice model

A survey was conducted of private enterprises in China to create three indexes which are the degree of government intervention in business operations, the degree of government corruption, and contract enforcement. The other concerned variables are the agglomeration, dummy for presence of US Embassy or Consulates and dummy for government promotion policies, wages, infrastructures (length of highway per square kilometre in a region), and education (percent of higher education students in the region). IPR index is the logarithm of the patent per capita approved number.

Kawai (2009)/[62]

1998-2006

1,839 Japanese manufacturing firms investing in China

The determinants of Japanese manufacturing firms’ location decisions in China

A conditional logit model

Empirical models were developed and tested. The dependent variable is choice of investment (1 = Yes, 0 = No). The independent variables are natural logarithms of the number of Special Economic Zones, IPRs index, natural logarithm of the share of total investment in fixed assets by state-owned units in relation to total investment, GDP, labour costs, road infrastructure and natural logarithm number of Japanese manufacturers All explanatory variables are lagged by one year.

Seyoum (2006)/[63]

1990 and 1995

63 countries

The impact of patent protection FDI

The OLS regression

Using the set of independent variables which include patent index by Ginarte and Park (1997) and controlling other variables such as market size, GDP growth, exchange rates, population, corruption, unemployment, trade/GDP, scientists and engineers, GDP growth

Lesser (2002)/[64]

1998

FDI in 44 developing countries

The effects of stronger IPR protection in the areas of imports and Foreign Direct Investment (FDI)

Multiple regression

The variables includes income per capita, past FDI, exchange rates, tariffs, the proportion of previous year FDI to GNP of pervious year, and the degree of industrialization. A new index was developed that uses membership in international treaties to measure the scope and efficiency of IPR.

Park and Ginarte (1997)/[65]

1960–1990

60 countries from developed to least developed countries

The impact of IPR protection on economic growth (GDP growth)

Regression

Creating an IPR index and estimating a system of equations to identify the effect of IPR protection and other national characteristics on economic growth such as R&D activity, investment, and education

Athukorala and Kohpaiboon (2006)/[66]

1990-2001 (three-year intervals)

168 US-based MNEs that have invested internationally (42 countries)

The determinants of the international location of R&D activity by foreign affiliates of US-based MNEs

Regression analysis

Included control variables are real GDP, distance, percentage of domestic sales in total affiliate sale turnover, technology intensity index, R&D personnel per million population, wages of technical personnel, tax incentives for firm-level R&D activities, intellectual property rights index (from World Economic Forum, Global Competitiveness Report), capital stock of US firms, an index of R&D potential of output mix, dummy variables for developing countries other than NICs, newly industrialized countries in East Asia, financial crisis dummy, and vector of time dummy variables

Blyde and Acea (2003)/[67]

1985, 1990 and 1995

The sources of FDI are 19 OECD countries and 40 countries as the recipients of FDI, 8 of which are from Latin America.

The inflows of foreign direct investment of Latin America and developing countries after TRIPS

The gravity model

The independent variables are GDP per capita, population, dummy of common language, past colonial links and region, distance between countries, Ginarte-Park IPR index

Supakankunti et al. (2001)/[70]

1988-1998

Thailand

The impact of patent law change in 1992 on FDI in Thailand

Observation

Providing the trend of FDI for industry in general and specifically for the chemical industry in Thailand