CLOSING THE INSTITUTIONAL GAP:
Protecting Technology in Foreign Direct Investment
I argue that MNCs seek protection for their assets through a “two-level bargaining” strategy that leverages home government strengths and host government channels for institutional change. I evaluate the strength of the two channels through original country level and firm level data, and show that MNC strategies reshape domestic laws and institutions. Leveraging cross-country technology investment data and an instrumental variable method, I provide robust evidence that foreign technology investments from a home country is associated with higher levels of intellectual property protection in a host country. I illustrate how private actors can act as institutional entrepreneurs using a case study of General Electric’s activities in China. I distinguish between de jure institutional change in terms of IP laws, and de facto institutional change in terms of enforcement levels, and empirically show that the more immediate effects of state-to-state bargaining are limited to de jure effects.
Overall, I find that MNCs are able to influence host country institutional outcomes in intellectual property protection, both in terms of de jure and de facto institutions. Foreign direct investment “closes the gap” between the levels of institutions of home and host countries, thereby contributing to rule of law in the latter.
-- University-wide winner, 2020 GAPSA-Provost Fellowship Award for Interdisciplinary Innovation
-- The Teece Award for empirical interdisciplinary dissertation research, UPenn
Monsanto Co. and soybean seeds in Brazil
(Fig source: iStock.com)
US - China disputes over intellectual property
(Fig source: www.obo-7.xyz)
Bayer AG and generic medicine in India
(Fig source: Associated Press)