This paper sets up a vertically related market model in which imitation and innovation are endogenously determined to study the impact of intellectual property rights (IPR) protection on less-developed countries. It shows how a less-developed country switches from imitation to innovation as it develops. It is also found that the relationship between IPR protection and economic development is -shaped. The IPR protection tends to go down and then go up as income rises. This finding also conforms with that in the empirical literature on IPR protection.

The debate between the North and the South about the enforcement of intellectual property rights in the South is examined within a dynamic general equilibrium framework in which the North innovates new products and the South imitates them. A welfare evaluation of a policy of tighter intellectual property rights is provided by decomposing a region's welfare change into four components: terms of trade, production composition, available product choice and intertemporal allocation of consumption spending. The paper provides a theoretical evaluation of each one of these components and their relative size. The analysis proceeds in stages. It begins with an exogenous rate of innovation in order to focus on the first two components. The last two components are added by endogenizing the rate of innovation. Finally, the paper considers the role of foreign direct investment.

There is considerable debate in economics literature on whether a decision by developing countries to strengthen their protection of intellectual property rights (IPRs) will increase or reduce their access to modern technologies invented by industrial countries. This access can be achieved through technology transfer of various kinds, including foreign direct investment and licensing. Licensing is the focus of this paper. To the extent that inventing firms choose to act more monopolistically and offer fewer technologies on the market, stronger IPRs could reduce international technology flows. However, to the extent that IPRs raise the returns to innovation and licensing, these flows would expand. In theory, the outcome depends on how IPRs affect several variables--the costs of, and returns to, international licensing; the wage advantage of workers in poor countries; the innovation process in industrial countries; and the amount of labor available for innovation and production. Yang and Maskus develop a theoretical model in which firms in the North (industrial countries) innovate products of higher quality levels and decide whether to produce in the North or transfer production rights to the South (developing countries) through licensing. Different quality levels of each product are sold in equilibrium because of differences in consumers' willingness-to-pay for quality improvements. Contracting problems exist because the inventors in the North must indicate to licensees in the South whether their product is of higher or lower quality and also prevent the licensees from copying the technology. So, constraints in the model ensure that the equilibrium flow of licensing higher-quality goods meets these objectives. When the South strengthens its patent rights, copying by licensees is made costlier but the returns to licensing are increased. This change affects the dynamic decisions regarding innovation and technology transfer, which could rise or fall depending on market parameters, including the labor available for research and production. Results from the model show that the net effects depend on the balance between profits made by the Northern licensor and lower labor costs in the South. If the size of the labor force used in Northern innovation compared with that used in producing goods in both the North and South is sufficiently small (a condition that accords with reality), stronger IPRs in the South would lead to more licensing and innovation. This change would also increase the Southern wage relative to the Northern wage. So, in this model a decision by developing countries to increase their patent rights would expand global innovation and increase technology transfer. This result is consistent with recent empirical evidence. It should be noted that while the results suggest that international agreements to strengthen IPRs should expand global innovation and technology transfer through licensing, the model cannot be used for welfare analysis. Thus, while the developing countries enjoy more inward licensing, the cost per license could be higher, and prices could also rise, with an unclear overall effect on economic well-being. This paper--a product of Trade, Development Research Group--is part of a larger effort in the group to assess the impact of intellectual property rights on economic development.

For most countries, economic development involves a process of 'catching up' with leading countries at the time. This is never achieved solely by physical assets and labour alone: also needed are the accumulation of technological capabilities, educational attainment, entrepreneurship, and the development of the necessary institutional infrastructure. One element of this infrastructure is the regime of intellectual property rights (IPR), particularly patents. Patents may promote innovation and catch up, and they may foster formal technology transfer. Yet they may also prove to be barriers for developing countries that intend to acquire technologies through imitation and reverse engineering. The current move to harmonize the IPR system internationally, such as the TRIPS agreement, may thus have unexpected consequences for developing countries. This book explores these issues through an in depth study of eleven countries ranging from early developers (the USA, Nordic Countries and Japan), and Post World War 2 countries (Korea, Taiwan, Israel) to more recent emerging economies (Argentina, Brazil, China, India and Thailand). With contributions from international experts on innovation systems, this book will be an invaluable resource for academics and policymakers in the fields of economic development, innovation studies and intellectual property laws.

In recent years, Intellectual Property Rights - both in the form of patents and copyrights - have expanded in their coverage, the breadth and depth of protection, and the tightness of their enforcement. Moreover, for the first time in history, the IPR regime has become increasingly uniform at international level by means of the TRIPS agreement, irrespectively of the degrees of development of the various countries. This volume, first, addresses from different angles the effects of IPR on the processes of innovation and innovation diffusion in general, and with respect to developing countries in particular. Contrary to a widespread view, there is very little evidence that the rates of innovation increase with the tightness of IPR even in developed countries. Conversely, in many circumstances, tight IPR represents an obstacle to imitation and innovation diffusion in developing countries. What can policies do then? This is the second major theme of the book which offers several detailed discussions of possible policy measures even within the current TRIPS regime - including the exploitation of the waivers to IPR enforcement that it contains, various forms of development of 'technological commons', and non-patent rewards to innovators, such as prizes. Some drawbacks of the regimes, however, are unavoidable: hence the advocacy in many contributions to the book of deep reforms of the system in both developed and developing countries, including the non-patentability of scientific discoveries, the reduction of the depth and breadth of IPR patents, and the variability of the degrees of IPR protection according to the levels of a country's development.

As technological developments multiply around the globeâ€"even as the patenting of human genes comes under serious discussionâ€"nations, companies, and researchers find themselves in conflict over intellectual property rights (IPRs). Now, an international group of experts presents the first multidisciplinary look at IPRs in an age of explosive growth in science and technology. This thought-provoking volume offers an update on current international IPR negotiations and includes case studies on software, computer chips, optoelectronics, and biotechnologyâ€"areas characterized by high development cost and easy reproducibility. The volume covers these and other issues: Modern economic theory as a basis for approaching international IPRs. U.S. intellectual property practices versus those in Japan, India, the European Community, and the developing and newly industrializing countries. Trends in science and technology and how they affect IPRs. Pros and cons of a uniform international IPRs regime versus a system reflecting national differences.

This paper theoretically and empirically analyzes the effect of strengthening intellectual property rights in developing countries on the level and composition of industrial development. We develop a North-South product cycle model in which Northern innovation, Southern imitation, and FDI are all endogenous. Our model predicts that IPR reform in the South leads to increased FDI in the North, as Northern firms shift production to Southern affiliates. This FDI accelerates Southern industrial development. The South's share of global manufacturing and the pace at which production of recently invented goods shifts to the South both increase. Additionally, the model also predicts that as production shifts to the South, Northern resources will be reallocated to Ramp;D, driving an increase in the global rate of innovation. We test the model's predictions by analyzing responses of U.S.-based multinationals and domestic industrial production to IPR reforms in the 1980s and 1990s. First, we find that MNCs expand the scale of their activities in reforming countries after IPR reform. MNCs that make extensive use of intellectual property disproportionately increase their use of inputs. There is an overall expansion of industrial activity after IPR reform, and highly disaggregated trade data indicate an increase in the number of initial export episodes in response to reform. These results suggest that the expansion of multinational activity more than offsets any decline in the imitative activity of indigenous firms.