Domestic innovation and joint ventures: IPRs, tariff, and spillovers

Many technology recipient countries believe that joint ventures (JVs) can promote more efficient technology transfer. In an attempt to explain how intellectual property rights (IPRs) affect technology transfer in JVs and domestic innovation, how IPRs policy may vary over time, and how IPRs policy and tariff policy interact with each other, I develop a three-period, two-country model. Based on the model, an empirical chapter tests if foreign direct investment(FDI) ownership structures/JVs lead to more significant technology spillovers.; The theoretical model assumes that a multinational enterprise (MNE) transfers advanced technology to a local firm through a JV. The JV exists for two periods and breaks up in the third period. When considering the JV stage only, developing countries with poor IPRs would prefer to establish even lower protection. However, when IPRs are stronger than a threshold level, both source (developed) countries and recipient (developing) countries would prefer stricter protection. Typically, IPRs protection is increasing in recipient country's bargaining power but decreasing in its innovation ability. However, recipient countries' IPRs policy may be altered with the presence of tariffs. Two nations with the same IPRs but unequal tariffs may have opposing opinions about the gains from stricter rights, with more open economies preferring laxer protection.; When considering potential benefits in the post JV stage, it leads to higher optimal IPRs in the third period, as well as lower IPRs in the JV stage. This finding explains the stylized facts that developing countries gradually shift to higher IPRs with economy advancement, and that in early stages of economic formation they have extreme low IPRs and intense violations.; Based on the theoretical model, an empirical chapter explores if FDI ownership structures bring higher technology spillovers in terms of innovation. Results indicate that total FDI does not have a significant effect on domestic innovation. However, when analysis differentiates majority-owned and minority-owned subsidiaries, I find that majority-owned FDI has a significant negative effect on patents. Minority-owned FDI, on the contrary, promotes domestic innovation. This supports the general belief that local contents can promote higher technology spillovers.