Study On Global Value Chain Specialization On The Perspective Of Intellectual Property Rights Protection

Global value chains(GVCs) are now a pervasive phenomenon in the global economy. Most countries are increasingly participating in GVCs to different degrees, and at various stages and levels in the chains. GVCs and patterns of value added trade are shaped to a significant extent by transnational corporations(TNCs). Thus successful participation in GVCs for countries often hinges on the extent to which they can attract investment or the extent to which local firms manage to interact with TNC lead firms. GVCs can bring a number of economic development benefits. They lead to direct economic impacts, in terms of value added, employment, income, and exports. They can also contribute to longer term economic development through technology and skills dissemination, and industrial upgrading. However, none of these benefits are automatic, and countries can remain fixed in low-value activities, unable to upgrade and capture more value for economic development.A large amount of Chinese manufacturing enterprises have been participating in the GVCS by accepting processing orders which barely gain profits from OEM or assembly. Even TNCS set up joint ventures or sole ventures in China, processing export is the most important trade pattern for those foreign-funded enterprises. There is a common feature for high-tech products exports in the developing economies(named host countries) in recent years that those TNCS affiliates in the host countries prefer to import core components from the developed countries(named parent countries) or other countries in the world merely performing simple processing or assembly and subsequently re-export finished products to the world market. Why do those TNCS dislike arranging all production tasks in the host countries? What factors affect the TNCS decision to invest overseas? What kind of efforts or policies should the developing countries devise to receive sound investment with complicated or high technologies which the host countries particularly need when they make industry upgrades? In the case of manufacturing industry, this paper details the GVCS specialization position on the perspective of intellectual property(IP) protection to analyze how IP protection and the effect on manufacturing industry? What strength of the host countries’ IP protection can urge TNCS to arrange more complex tasks in the above countries? Besides IP, what other factors affect TNCS’ investment decisions to transfer more complex tasks which benefit the host countries industry upgrading or enhance their production technological innovation?This paper is comprised of 7 chapters, the content and viewpoints of each are as follows:Chapters 1 and 2 are the introduction and literature review, respectively.Chapter 3 contains definitions of IP protection and GVCS’ specialization and also lists how many methods to calculate the above index. Additionally, two panel data for 40 countries in the world and 30 provinces in China are available for empirical test arranged in Chapter 5 and 6, so dependent variables for countries and provinces are introduced to be calculated, as are the main explanatory variables.Chapter 4 analyzes the theoretical framework based on the DS(Dixit-Stiglitz) model meanwhile borrowing from the methods from domestic scholars’ achievement, which analyzes how much the strength of IP protection in the host countries influences TNCs’ investment decision. Theoretical analysis shows that within the background of GVCs’ specialization, in order to reduce the loss of business due to the imitation behavior made by the host country, TNCs prefer to design less complex production arrangements for host countries, and the core production tasks with higher-level technology and high value created are completed the in their parent countries or countries with a higher level of intellectual property protection.Chapters 5 and 6 are for the empirical test. From the aspect of the manufacturing sector in general and sub-sectors respectively, are tested by using The manufacturing sector, in general, and also its sub-sectors, are tested by using cross-national and China cross-provincial data respectively..Empirical research is available for the theoretical framework given in Chapter 3. In addition to intellectual property protection, there are many factors that affect size and quality of foreign direct investment made by TNCs which thus affects the host country’s position in the GVCs. Consequently, other factors are tested together with IP protection in these two chapters. All countries and provinces are divided into two groups respectively to be tested on the basis of economics development level.Chapter 7 is the conclusion, summarizing the above chapters followed by some suggestions in combination with China’s status quo development from the enterprise and national level.This paper focuses on GVCs specialization of manufacturing industry from theangle of IP protection on the basis of previous research results and the theoreticalframework by using cross-international and cross-provincial panel data, and theempirical test results to verify that the host country’s level of intellectual propertyprotection plays an important role in affecting TNCs’ foreign investment locationdecisions. This study indicates that a lower level of intellectual property protectionmay be the reason why developing countries including China receive low-techinvestment from TNCs, which lead to the developing countries locked at the lowerposition in GVCs, to strengthen IPR protection may be one of the optimal options forthe developing countries to change this situation.