Intellectual Property Protection , Internalization , and Technology Transfer

I analyze the manner in which multinational enterprises facilitate technology transfer from the North to the South, and the role played by the protection of intellectual property. Different industries respond to changes in intellectual property protection (IPP) regimes differently, and will alter their mode of entry accordingly. Firms with complex but easily imitable products will tend to internalize production through foreign direct investment, but firms that face a lower risk of imitation will tend to license production to non-affiliated Southern firms. Changes in IPP alter the level and the composition of technology transfer, depending on the value of the firm’s proprietary asset.