Strategic intellectual property protection policy and north-south technology transfer

I analyze the welfare implications of protecting intellectual property rights (IPR) in developing countries through its impact on innovation, market structure, and technology transfer. FDI, tariffs, and joint ventures (JV) are introduced to the strategic IPR literature. In a North-South trade environment, the South sets the IPR policy strategically by anticipating the Northern firm’s R&D expenditure and multinationalization decision. A stringent IPR policy is always chosen in order to motivate technology transfer through FDI, which in turn improves welfare. JVs bring in more profits for the Southern firm, but FDI is the optimal form of transfer in terms of welfare.