Market Structure, FDI, Imitation and Innovation : An Empirical Verification Based on North-South Intellectual Property Rights Conflict

The study is to develop an extended North-South model to analyze the IPR conflict and possible policy implications for the pharmaceutical industry. In this proposed theoretical and empirical work, innovation from the North, followed by imitation in the South (India and Bangladesh), and Foreign Direct Investment (FDI) all will be treated as endogenous. We feel that whether tighter IPRs benefit the North or South depends crucially on market structure. It seems that in an oligopolistic market induced by vertical innovation, tighter IPRs may hurt both economies; while in a monopolistic competition market induced by horizontal innovation, tighter IPRs may benefit both economies as long as the degree of IPR protection is appropriately chosen. Thus it is possible to argue the existence of an optimal degree of IPR protection in the South, which may differentiate it from that in the North