Patently Different? How Does the Strength of Patents Influence Globalization of R&D? Empirical Evidence

There is an increasing trend for Multi-National Enterprises (MNEs) to off-shore R&D activities to developing countries where Intellectual Property regimes (IP) are weak. Prior work in international trade theory suggests that there is limited technology transfer by MNE to destinations with weak IP regimes. However, there is considerable evidence that MNE offshore significant levels of R&D, over and above what is required for local customization or government enforced technology transfers. In this paper, using a unique natural experiment that relates to the recently enacted patent reforms in India, we contribute towards understanding how IP regime strength influences the division of labor in technology generation activities within a firm but across locations. JEL codes: K11, O32, 034