Intellectual property rights, imitation, and development. The effect on cross-border mergers and acquisitions

Abstract

In this paper, we analyze whether the recent global process of strengtheningand harmonization of intellectual property rights (IPRs) affects decisions ofcross-border mergers and acquisitions (M&As). We investigate if IPRs havea differential effect across sectors of different technology content and forcountries of different development level. Also, we study how imitation abilities of target countries interact with the tightening of IPRs. Using data for the post-TRIPS period (1995-2010), we estimate an extended gravity model to study the bilateral number of M&As, including a measure of the strength of IPRssystems on target countries and a set of control variables usually consideredas determinants of M&As. The estimation results verify the gravity structure for M&As and show that IPRs -and enforcement- influence decisions of cross-border M&As in all sectors regardless of their technological content. However, IPRs are more important in countries with high imitation abilities and in sectors of high-technology content. Furthermore, a strengthening of IPRs leads to a larger increase of M&As in developing countries than in developed countries.These results call the attention on the possible implications for least developedeconomies and challenge the adequacy of a globally harmonized IPRs systems.