《《Contracts》.pdf

Journal of International Economics 53 (2001) 189–204 www.elsevier.nl/locate/econbase Contracts, intellectual property rights, and multinational investment in developing countries James R. Markusen* Department of Economics, University of Colorado, Campus Box 256, Boulder, CO 80309-0256, USA Received 29 January 1998; received in revised form 30 November 1999; accepted 15 January 2000 Abstract The policy debate between multinational firms favoring strong contract law, and host- country governments who often oppose such protection motivates the paper. Local agents (managers) learn the multinational’s technology and can defect to start a rival firm. Contract enforcement, including binding the multinational itself, makes the multinational better off. Outcomes for the host country are more complex, depending on mode switches induced by enforcement. If enforcement induces the multinational to switch from exporting to local production, welfare improves. If local production was occurring anyway, enforcement may result in the loss of rents to local agents and lower welfare.  2001 Elsevier Science B.V. All rights reserved. Keywords : Contracts; Intellectual property rights; Multinational investment; Developing countries JEL classification : F12; F23 1. Introduction Property rights, enforceable contracts and intellectual property protection (IPP) have been an important policy issue for a number of years, with the US in particular insistent that developing countries adopt higher standards. The develop- ing countries in turn resist such pressure, seeing IPP as largely leading to a rent *Tel.: 1-303-492-0748; fax: 1-