Impact of Foreign Intellectual Property Rights Protection on U.S. Exports and FDI

Since the early 1990s, there has been a growing interest in the potential contribution of intellectual property rights (IPR) protection to global trade and investment. However, there is an ongoing debate among analysts regarding the extent to which stronger IPR actually stimulate international transactions via transfer of technology. This paper addresses this issue by evaluating how foreign intellectual property rights (IPR) protection affects how U.S. firms serve overseas markets through exports and foreign direct investment (FDI). Using panel data from 53 countries over 1994-2006, the empirical analysis was based on a dynamic system GMM modeling framework. The empirical results suggest that IPR has a weak negative effect on U.S. exports, but a statistically significant positive effect on U.S. FDI. In addition, the results also indicated that less US exports flow to countries with weak imitative ability after they strengthen IPR protection