Intellectual property rights and North-South trade: Exports vs. foreign direct investment

This paper examines whether a Northern firm prefers to export or engage in FDI serve the South. If engages FDI, its technology is imitated, and Southern enters market that may sell both markets. The invest prevent product piracy North. two markets have different sizes. We find when cost of preventing North great enough: (i) large enough allowing home market, South obtains greater welfare; (ii) small exports government imposes strong Intellectual Property Rights protection, attracting improving welfare countries.