For this week’s RITM Lunch Seminar, Sara Biancini (CREM, Université de Caen Normandie) presented “Intellectual Property Rights, MNFs and Technology Transfers” (with Pamela Bombarda (Université de Cergy-Pontoise)). The RITM Lunch Seminar was held on Monday, January 23.
We build a theoretical model in which MNFs based in developed countries (the North) o shore production of an intermediate good in a developing country (the South). MNFs can open a subsidiary in the country (vertical integration), or rely on independent contractors (outsourcing), through a licensing contract based on a Northern blueprint. The environment in the destination country is characterized by incomplete contracts and an imitation risk related to weak IPR enforcement. Our model shows that under reasonable assumptions on model parameters, a reinforcement of IPR in the South increases the relative share of imports from vertically integrated suppliers (and decrease the share of outsourcing to independent suppliers). The model predictions are tested using data on intra-rm trade of US multinationals provided by the U.S. Related-Party Trade database.