Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/179231 
Year of Publication: 
2017
Series/Report no.: 
ADBI Working Paper No. 775
Publisher: 
Asian Development Bank Institute (ADBI), Tokyo
Abstract: 
This paper examines the effect of foreign direct investment (FDI) on domestic innovation based on a data set covering the pharmaceutical industries across 29 provinces in the People's Republic of China (PRC) over the period 1998-2007. We show that there is a negative horizontal spillover effect of FDI on domestic innovation when the intellectual property rights (IPR) regime is weak. This spillover effect became more positive when the IPR regimetrengthened after the PRC's accession to the World Trade Organization) (WTO) in 2001. We also show that there is a positive upstream spillover effect of FDI on domestic suppliers of pharmaceutical intermediates. Taken together, our findings provide important policy implications on why developing countries should encourage FDI and strengthen the IPR regime together to enhance domestic innovation for promoting productivity and economic growth.
Subjects: 
innovation
patents
knowledge spillover
intellectual property rights
multinational enterprises
People's Republic of China
JEL: 
D22
F23
L65
O31
O34
O38
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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