Intellectual property rights and innovation in developing countries

This paper studies intellectual property rights (IPRs) and innovation in developing countries. A model is developed to illustrate the trade-off between imitating foreign technologies and encouraging domestic innovation in a developing country's choice of IPRs. It is shown that innovations in a developing country increase in its IPRs, and a country's IPRs can depend on its level of development non-monotonically, first decreasing and then increasing. Empirical analysis, with a panel of data for 64 developing countries, confirms both the positive impact of IPRs on innovations in developing countries and the presence of a U-shaped relationship between IPRs and economic development. (c) 2005 Elsevier B.V. All rights reserved.