Does Intellectual Property Rights Reform Spur Industrial Development?

An extensive theoretical literature generates ambiguous predictions concerning the effects of intellectual property right (IPR) reform on industrial development. The impact depends on whether multinational enterprises (MNEs) expand production in reforming countries and the extent of decline in imitative activity. We examine the responses of U.S.-based MNEs and domestic industrial production to a set of intellectual property rights (IPR) reforms in the 1980s and 1990s. Following reform, MNEs expand the scale of their activities. MNEs that make extensive use of intellectual property disproportionately increase their use of inputs. There is an overall expansion of industrial activity after reform, and highly disaggregated trade data indicate higher exports of new goods. These results suggest that the expansion of multinational activity more than offsets any decline in imitative activity.