Modes of international technology transfers: Role of R&D intensity, spillovers and intellectual property rights

The goal of this dissertation is to enhance the understanding of the forces that govern technology transfer to a host country. The first two parts examine the forces governing foreign direct investment, while the third focuses on the choice between direct investment and licensing. The role of R&D intensity of the host country, spillovers from the affiliates to the host country and to the multinational enterprise (MNE), and the role of intellectual property rights (IPR) on technology transfer are examined. Chapter two explores the mode of entering a foreign market through foreign direct investment or exports in a partial equilibrium setting. It sheds light on the existing literature showing how the interplay of factors such as MNE allocating resources devoted to R&D activities, the level of legal rights protection, and the spillovers that NINE obtains from subsidiaries and local competitors are crucial in the MNEs choice of FDI over exports. Chapter three empirically examines the theoretical predictions of chapter two. The analysis is initially undertaken for U.S. outward FDI for a sample of developed economies using panel data estimation techniques. The results indicate that there is not just one set of factors explaining FDI. Country-specific technological advantage is a significant determinant of outward FDI, accompanied with market access and tariff jumping. The results also show foreign markets are initially served through exports, and later through direct investment. The existence of a non-linear relationship between R&D spillovers and FDI is demonstrated. A sectoral analysis is then undertaken. The analysis reveals that intellectual property rights (IPR) has a positive and significant impact on the high technological sectors, and strengthening IPR in developing host countries has no significant impact on inward FDI. Chapter 4 examines the role of the same determinants in the choice of FDI versus licensing. We analyzed U.S. MNEs for a sample of host economies using two methodologies: panel data and SUR estimation. The main result is that strengthening IPR in the host country has a positive impact on FDI and all forms of licensing. As R&D intensity and spillovers to the host country increase, the MNE prefers FDI over licensing.