Three essays on intellectual property rights and international technology transfer

Developing countries today face external pressures to implement stronger intellectual property rights (IPRs). These countries are in general characterized as imitators that learn from technology transferred from innovating (industrialized) countries. Therefore, implementing IPRs would seem counterintuitive for developing countries as it restricts their ability to imitate. However, the true impact of IPR policy in developing countries remains largely unclear. My research unravels some of the links between IPRs, and technology transfer issue in the following three essays. My first essay focuses on the Indian pharmaceutical market. I describe the transition dynamics of imposing stronger IPRs in a theoretical model and I test the implications of this model for the adjustment path of innovation, imitation and R&D offshoring using a panel of 354 Indian pharmaceutical firms over the period 1989 to 2008. I find that that innovation behaves as expected while imitation exhibits an unexpected increase after the announcement and decreases after the policy change. To better understand this transition, the second essay examines the short-run and long-run effects of stronger IPRs within two types of endogenous product-cycle models developed by Grossman and Helpman. In my third essay I analyze the offshoring decision of companies for either forming a joint venture with a local firm or entering a contractual partnership, with a special focus on the research and development activity. First I present a theoretical model that describes this decision and then I test the implications of the model in the pharmaceutical market for a panel of 89 countries over the period 1990 to 2009. I find that weak IPRs in the destination country support a joint venture partnership to reduce the risk of knowledge leakage while large fixed costs of establishing a joint venture supports a contractual partnership