The impact of strong intellectual property rights protection on knowledge flow through multinational corporations´ foreign firect investment

The intellectual property rights (IPRs) protection of a country plays a critical role in the decision of multinationals to open a subsidiary in the host country. Tightening the IPRs protection may change the activity of these subsidiaries in the way international knowledge flow between the home and host country... This paper examines the impact of strong intellectual property rights (IPRs) protection on the knowledge flow between the U.S. and host countries of U.S. affiliates. We use patent citations to examine whether the spillover of technology between the host countries and the U.S. is accelerated by strong IPRs protection. The results suggest that the protection favor innovative efforts of domestic firms in host countries rather than U.S. affiliates. Thus, the IPRs protection promotes the knowledge flow from the U.S. to host countries.