Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159823
Authors: 
Naghavi, Alireza
Peng, Shin-Kun
Tsai, Yingyi
Year of Publication: 
2015
Series/Report no.: 
Quaderni - Working Paper DSE 985
Abstract: 
This paper examines the impact of intellectual property rights (IPR) enforcement on multinationals' choice of input suppliers and industry profits in a host economy. The framework consists of suppliers with heterogeneous capabilities who must engage in a relation-specific investment to customize intermediate inputs upon a transfer payment by final producers. An outsourcing contract with better technologically-endowed suppliers requires a lower transfer and generates a higher surplus. Stronger IPR enforcement leads firms to self-select into better quality suppliers on average by reducing their outside option. Weak legal institutions instead make it possible for a larger range of suppliers, including the less capable ones, to form partnerships by granting them a larger outside option. A better IPR environment is more likely to harm lagging countries where the technology distribution is characterized by less capable suppliers.
JEL: 
O34
L24
F21
F23
O32
L22
D23
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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