The Effects of Intellectual Property Rights on Innovation and Economic Activity : A Non-Linear Perspective from Latin America

Intellectual property rights (IPRs) play a crucial role in enhancing economic growth and further supporting domestic and foreign innovation activities. Nevertheless, the literature still diverges regarding IPR effects in developing countries. Therefore, this study explores how the role of IPRs affects economic activity in Latin America and Caribbean countries. We further examine the moderating role of IPRs on the relationship between two sources of innovation (domestic and foreign) and economic activity. The analysis explored 18 Latin American and Caribbean countries (2007–2017). Contrary to what we proposed, the results suggest a strong inverted U-shaped effect between IPR and economic activity. The study show that IPRs exert a positive moderating role in the relationship between domestic innovation and economic activity, following a U-shaped pattern. Likewise, this relationship prevails for foreign innovation. Findings provide additional recommendations for policymakers to set up IPR policies toward fostering domestic and foreign innovation in developing countries