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Intellectual property and the organization of the global value chain

Bolatto, Stefano, Naghavi, Alireza, Ottaviano, Gianmarco I. P. and Zajc Kejzar, Katja (2020) Intellectual property and the organization of the global value chain. CEP Discussion Papers (1673). Centre for Economic Performance, LSE, London, UK.

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Abstract

This paper introduces the concept of intangible assets in a property rights model of sequential supply chains. Firms transmit knowledge to their suppliers to facilitate input customization. Yet, to avoid knowledge dissipation, they must protect the transmitted intangibles, the cost of which depends on the knowledge intensity of inputs and the quality of institutions protecting intellectual property rights (IPR) in supplier locations. When input knowledge intensity increases (decreases) downstream and suppliers' investments are complements, the probability of integrating a randomly selected input is decreasing (increasing) in IPR quality and increasing (decreasing) in the relative knowledge intensity of downstream inputs. Opposite but weaker predictions hold when suppliers' investments are substitutes. Comprehensive trade and FDI data on Slovenian firms' value chains provide evidence in support of our model's predictions. They also suggest that, in line with our model, better institutions may have very different effects on firm organization depending on whether they improve the protection of tangible or intangible assets.

Item Type: Monograph (Discussion Paper)
Official URL: https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information: © 2020 The Authors
Divisions: LSE
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HG Finance
H Social Sciences > HF Commerce
JEL classification: F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies
F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements
F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure: Markets vs. Hierarchies; Vertical Integration; Conglomerates; Subsidiaries
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L24 - Contracting Out; Joint Ventures; Technology Licensing
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O34 - Intellectual Property Rights: National and International Issues
Date Deposited: 11 Jan 2021 14:33
Last Modified: 12 Jan 2021 01:23
URI: http://eprints.lse.ac.uk/id/eprint/108228

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