Intellectual property rights protection and location of R&D by multinational enterprises

This paper explores the determinants of R&D location of US multinational enterprises (MNE). The major aim is to determine the impact of intellectual property rights protection on R&D investment by US multinationals in a sample of developed and developing economies. Some of the major findings show that in developing economies, MNEs primarily rely on the scope of foreign direct investment, while locating their R&D facilities overseas. On the other hand, for developed countries, the scope of patent protection laws is a major factor for MNEs to undertake R&D investment. Another finding is that in developing economies, location of R&D is motivated by the need to adapt products and processes to conditions in foreign markets. Further, in the food and chemical industry, evidence shows that weaker patent protection may be desirable for technology to flow to these sectors in developing economies. An important policy implication is that entry of firms enhances global innovations.