European intellectual property institutions and Chinese foreign direct investment

Abstract

PurposeWe investigate the impact of the strength of intellectual property (IP) institutions on Chinese outward foreign direct investment (OFDI).Design/methodology/approachWe use two different measures of IP on a sample of 21 European countries in the period 2003–2015. Panel quantile methodology is applied to assess the relationship at several points of the conditional distribution of OFDI.FindingsWe provide novel and robust evidence revealing a highly negative relationship between OFDI and the strength of IP institutions in Europe. This relationship which is more pronounced in the median and upper-quantiles, bolsters the conventional theoretical expectation that high institutional distance between home and host countries is inversely related to OFDI. Equally important is the preliminary evidence of the non-linear impact of IP at the median and upper-quantiles as well as the impact of other controlling variables such as GDP, population, trade openness and unit labour costs on Chinese OFDI.Originality/valueThe ensuing theoretical implications are of great significance for future studies on the institutional distance and drivers of OFDI by emerging economies as well as for European policymakers in so far as the strengthening of IP institutions constitutes a gravitational point for inward investment flows from China.

A co-evolution perspective of EMNE internationalization and institutions: An integrative framework of 5Cs

“…More recently, an emerging view contesting the traditional argument maintains that owing to the experience of institutional voids and fragility at home, EMNEs have the ability to deal with weak institutions, making them impervious to host country political risks (Buckley & Munjal, 2017) and weak intellectual property institutions (Alexiou & Vogiazas, 2021). They may even prefer risky environments, which are generally avoided by developed economy firms, and therefore are less competitive and offer potentially higher returns (Buckley et al, 2007;2016).…”

Does intellectual property rights protection affect UK and US outward FDI and earnings from FDI? A sectoral analysis

“…We advance on the norm of outdated IPR indices such as Park (2008), which does not consider the effectiveness of patent enforcement in practice in courts and other areas of policing the law (see, e.g. Brander et al, 2017), by employing the IPR enforcement index (Papageorgiadis et al, 2014, henceforth IPS) that provides estimates of the level of transaction costs that IPowning firms face when engaging with a national patent system (for a recent application of this index on how the strength of IP institutions affects Chinese OFDI, see Alexiou and Vogiazas, 2021). The data used to quantify the components of an IP system include items such as the effectiveness of judicial and police enforcement and the level of corruption in the The FDI-IPR relationship judiciary that measure the perceptions of IP asset owners of how enforcement agents behave in IPR regimes.…”