Essays on dynamics of intellectual property rights and international joint ventures

This thesis theoretically and empirically examines the effect of intellectual property rights protection (IPP) on international joint ventures (JVs). Chapter 1 introduces the motivation and the main purpose of the thesis.; Chapter two develops a product cycle model in the North-South framework to examine the effect of intellectual property rights (IPRs) on international joint ventures. In the chapter, we consider three types of JV contract as follows: First, a preventing contract specifies the Northern profit share of a JV as a decreasing function of imitation. A compensating contract specifies the Northern profit share of a JV as an increasing function of imitation. Lastly, a self-enforcing contract is basically a preventing contract that completely prevents imitation. The effects of stronger IPRs on the extent of joint ventures vary across the type of JV contract. For a preventing contract, stronger IPRs decrease the extent of joint ventures. For a compensating contract, stronger IPRs increase the extent of joint ventures if the elasticity of the Northern profit share of a JV with respect to imitation is sufficiently high. For a self-enforcing contract, stronger IPRs unconditionally increase the extent of joint ventures.; Chapter three extends the analysis of chapter two to the case where the Northern multinational faces not only imitation risk, but also an asymmetric information problem. The model features the equilibrium with two co-existing levels of technology (high quality and low-quality). The asymmetric information problem occurs because a low-quality Northern multinational has an incentive to act as if it is a high-quality Northern multinational and then transfer the low-quality product instead of the high-quality product to a JV. The high-quality Northern multinational must design a JV optimal contract in such a way that solves the asymmetric information problem and prevents the Southern partner from imitating. The optimal contract for a high-quality multinational specifies the Northern value of a JV as an increasing function of the strength of IPRs. We find that stronger IPRs decrease the extent of the high-quality JV market, defined as the fraction of all products produced in a market, where low-quality products and high-quality products are produced by JVs.; Chapter four empirically examines the effect of intellect property protection on 2 aspects: sales of JVs and majority-owned affiliates, and the number of firms having JVs and wholly-owned affiliates. The BEA data set on sales of JVs and majority owned affiliates is in 1989 and 1993--2000 in 51 countries. The BEA data set of the number of U.S. parents having wholly-owned affiliates or joint ventures covers 55 industries in 43 countries in 1995. The empirical JV model is built upon the reduced form of sales and the extent of joint ventures in the theoretical model in Chapter two. We find that stronger IPRs increase sales of both JVs and majority-owned affiliates. However, JV sales are more responsive to the change of IPRs than sales of majority-owned affiliates are. Moreover, we find evidence of substitution between JVs and wholly-owned affiliates. There exists a threshold level of the education variable above which, stronger IPRs favor JVs at the expense of wholly-owned affiliates. This threshold level could be explained by the interaction between the sharing incentive and the internalization incentive.; Chapter five summarizes, concludes, and suggests directions for future research.