Intellectual Property Rights and Foreign Direct Investment in Low Income Countries

Abstract

This paper explores the connection between intellectual property (IP) rights protection and inward foreign direct investment in low and lower-middle income countries. The study uses the Ginarte and Park (2008) Index to measure the level of IP protection a country offers, as well as several control variables from the World Bank’s World Development Indicators and the Fraser Institute’s Economic Freedom of the World Index. Conducting an OLS and fixed panel econometric analysis, no clear conclusion can be drawn. The OLS regressions generated a negative but insignificant Intellectual Property Rights (IPR) coefficient, meaning its estimates are not different from zero. The panel data analysis produced significant and negative IPR coefficients, meaning that intellectual property protection can actually decrease the amount of FDI coming into a country. While the model produced unexpected results, they do not entirely conflict with previous literature. Instead, the analysis is undermined by a small sample size and the lack of detailed data.