The Impact of Intellectual Property Protection on MNEs’ Decisions to Invest in Developing Countries: Empirical Evidence from New Swiss Firm-Level FDI Panel Data

Abstract

This article reviews the impact of intellectual property (IP) protection on foreign direct investment (FDI) by multinational enterprises (MNEs) in developing countries. Applying different panel data techniques to a newly-created comprehensive FDI/IP dataset of 31 Swiss MNEs investing into 53 developing WTO Members over a period of 21 years (1990-2010), this study seeks to examine whether the local IP protection level has a significant positive effect on MNEs’ decisions to invest in developing host countries and whether this effect differs between particular industry sectors, technological intensity levels and stages of host country development. The author could not find conclusive evidence that IP protection has an overall significant positive effect on FDI volumes. A differentiated analysis of specific sectors, however, does identify a significant positive effect for the chemical industry and for high-tech/medium-high-tech companies. Furthermore, no conclusive evidence was found that the effect of IP protection on investment decisions by MNEs differs according to the development level of the host country.