Do Stronger Intellectual Property Rights Increase International Technology Transfer? Empirical Evidence from U.S. Firm-Level Data

Research-Technology Management, Jan-Feb, 2006

Do Stronger Intellectual Property Rights Increase International Technology Transfer? Empirical Evidence from U.S. Firm-Level Data; Lee Branstetter, Raymond Fisman, and C. Fritz Foley; National Bureau of Economic Research Working Paper 11516, Sept. 2005.

Affiliate-level data on U.S. multinational firms and aggregate patent data were used to test whether recent legal reforms increased the transfer of technology to multinational affiliates in reforming countries. The researchers found that where patent protection has been strengthened, royalty payments increase for the use or sale of intangible assets made by affiliates to parent corporations, which reflect the value of technology transfer. This increase is concentrated among the affiliates of firms that make extensive use of U.S. patents prior to reform. Investment in R&D by affiliates also increases after IPR reform, as do both the level and growth rate of non-resident patenting.

These increases collectively suggest that at least one component of growth in licensing flows is associated with the introduction of new technology following patent reforms. The researchers found no corresponding reaction in resident patent filings. Taken together, they conclude that strengthening IPR protection results in real increases in technology transfer within multinational corporations.