FDI, IPR protection and export quality : an empirical analysis based on national data

Purpose: With the focus on the impact of foreign direct investment (FDI) on export quality or of intellectual property rights (IPR) protection on export trade, there is little scholarly attention on how IPR protection affects the relationship between FDI and export quality. This study aims to examine the potential nonlinear dynamic threshold effect of IPR protection on the relationship between FDI and export quality. Distinguishing between developing and developed countries, the authors present an empirical analysis of the effects of FDI on export quality per degree of IPR protection. Design/methodology/approach: Using panel data on 45 countries for the period from 1992 to 2014, we use a nonlinear dynamic panel threshold model to examine the effect of IPR protection on the relationship between FDI and export quality. Findings: The authors find a triple threshold effect of IPR protection in both developing and developed countries. The three threshold values are larger for developed countries than for developing countries. The coefficients on the relationship between FDI and export quality per degree of IPR protection are larger in developing countries than in developed countries, except for high IPR protection. The results of the paper suggest that the effect of FDI on export quality differs greatly per degree of IPR protection. In both developing and developed countries, FDI impacts export quality most significantly under medium-high IPR protection. Having estimated the optimal range of IPR protection for attaining FDI in both groups of countries, policy recommendations are offered. Originality/value: These findings not only contribute to the literature but also provide a view that a moderate level of IPR protection is conducive to attracting FDI and improving export quality.