Relationship-Specific Investments and Intellectual Property Rights Enforcement with Heterogeneous Suppliers

Naghavi, Alireza ; Peng, Shin-Kun ; Tsai, Yingyi (2015) Relationship-Specific Investments and Intellectual Property Rights Enforcement with Heterogeneous Suppliers. Bologna: Dipartimento di Scienze economiche DSE, p. 25. DOI 10.6092/unibo/amsacta/4151. In: Quaderni - Working Paper DSE (985). ISSN 2282-6483.
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Abstract

This paper examines the impact of intellectual property rights (IPR) enforcement on multinationals' choice of input suppliers and industry profits in a host economy. The framework consists of suppliers with heterogeneous capabilities who must engage in a relation-specific investment to customize intermediate inputs upon a transfer payment by final producers. An outsourcing contract with better technologically-endowed suppliers requires a lower transfer and generates a higher surplus. Stronger IPR enforcement leads firms to self-select into better quality suppliers on average by reducing their outside option. Weak legal institutions instead make it possible for a larger range of suppliers, including the less capable ones, to form partnerships by granting them a larger outside option. A better IPR environment is more likely to harm lagging countries where the technology distribution is characterized by less capable suppliers.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Naghavi, Alireza
Peng, Shin-Kun
Tsai, Yingyi
Keywords
International outsourcing, Supplier heterogeneity, Relation-specific investment, Intellectual property rights enforcement, Outside option, Customization, Technological capability
Subjects
ISSN
2282-6483
DOI
Deposit date
12 Jan 2015 14:49
Last modified
28 Oct 2015 11:26
URI

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