Intellectual property and the organization of the global value chain

This paper highlights the role of intangible assets in a property rights model firm organization with sequential production. Empirical evidence based on foreign direct investment and transaction-level trade data Slovenian firms reveals that strength intellectual (IPR) protection supplier's location affects firms' organizational choices whenever supplier investments are complements. In this case, when must transmit know-how to each supplier, more knowledge is accrued as production moves downstream, better IPR institutions lead lower incidence vertical integration over outsourcing, principally at downstream stages. On other hand, choice far less responsive for substitutes. Moreover, we show improving contracting (e.g. rule law) may have opposite effect boundaries. Our findings conform which quality regime governs transmission along supply chain, ultimately driving through suppliers' incentive structure.