Essays on international and innovation economics [electronic resource]

This dissertation examines the influence of intellectual property institutions on cross-border economic activity. Chapters 1 and 2 focus on the investment strategies of multinational firms in the presence of intellectual property risk. Chapter 3 examines the impact of patent treaties on international technology transfer. In Chapter 1, I develop a theoretical model of multinational firms' location and production decisions in the presence of cross-country differences in intellectual property rights and cross-sector differences in the length of product lifecycles. I show that patent reforms are irrelevant to firms' sourcing decisions in industries with rapid product turnover. By contrast, strong patent laws attract affiliate activity in industries with longer product lifecycles, because products in these industries are more likely to be imitated prior to obsolescence and are thus more reliant on patent enforcement to protect revenues. These effects are more pronounced for less-productive firms. Using comprehensive panel data on the sales, assets, and employment of U.S. multinationals and their affiliates abroad and a new measure of product obsolescence, I find robust empirical support for these predictions. Effects are significant along all margins of multinational activity, including multinational presence by country and sector, total affiliate sales conditional on presence, the number of affiliates, and affiliate-level sales. In addition, I find that stronger patent rights tilt the balance of cross-border activity away from exports and toward multinational activity. Finally, my identification strategy allows me to isolate the causal effect of patent reforms on multinational operations, which the prior literature has struggled to establish because of concurrent policy reforms. In Chapter 2, I develop a theory of global supply chains in the presence of imitation risk, where sectors vary in fragmentation costs and product obsolescence rates. The model provides detailed predictions regarding the sensitivity of multinationals' offshoring decisions to intellectual property rights abroad. In particular, when intellectual property rights abroad are strengthened, firms are found to increase the technology intensity and level of offshoring, with the largest effects in sectors with high fragmentation costs. Similar to Chapter 1, these effects are also larger in sectors with long product lifecycles. In addition, the model predicts that each firm determines the number of offshore countries involved in its supply chain based on a simple trade-off: on one hand, fragmentation allows the firm to better protect its intellectual property, but on the other hand, fragmentation generates increasing coordination costs. Chapter 3 examines the influence of the Paris Convention of 1883, the first international patent treaty, on the flow of patented technologies across countries; this chapter is co-authored with Petra Moser. U.S. accession to the Convention in 1887 strengthened patent protection for nationals from current treaty members, but had no effect on the patent rights of non-members. Data on over 86,000 U.S. patents granted between 1865 and 1914 indicate that strengthened intellectual property rights encouraged inventors from member countries to increase patenting in the United States, relative to inventors from non-member countries. The data also reveal that stronger intellectual property rights had the most significant effects on technology transfer from member countries with high pre-treaty levels of education and per-capita income. In addition, responsiveness to the Paris Convention was higher in industries that were more dependent on patent protection compared with industries that were less dependent on patents.

Keywords: Economics.
Advisor: Manova Kalina
Staiger Robert W. primary advisor. Thesis advisor
Arrow Kenneth J. (Kenneth Joseph)
Bloom Nick
Moser Petra advisor. Thesis advisor