TY  - JOUR
AU  - Markusen,James R.
TI  - Contracts, Intellectual Property Rights, and Multinational Investment in Developing Countries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6448
PY  - 1998
Y2  - March 1998
UR  - http://www.nber.org/papers/w6448
L1  - http://www.nber.org/papers/w6448.pdf
N1  - Author contact info:
James R. Markusen
Department of Economics
University of Colorado
Boulder, CO 80309-0256
Tel: 303/492-0748
Fax: 303/492-8960
E-Mail: james.markusen@colorado.edu
AB  - The institution and enforcement of property rights and contracts have been an important policy issue for the developing countries, the transition economies, and the developed countries in the 1990s.  This has led to the development of a literature on technology transfer and how property rights might affect such transfers and host-country welfare.  Much of this literature is non-strategic, with large numbers of  northern' innovative firms and  southern' imitators, and focusses on endogenous R&D and imitation levels.  This paper takes a different and complementary approach, developing a strategic model in which local managers learn the multinational's technology and can defect to start a rival firm.  If contract enforcement leads the MNE to shift from exporting to producing inside the host country, both the host country and the MNE are better off.  If the MNE had established a subsidiary prior to the establishment of enforcement, the host country is indifferent or worse off by enforcement.  In the latter case, rents are transferred from the local manager to the MNE.
ER  -