Some Bad News is Good News for Foreign Investors: The Case of Intellectual Property Rights Infringement in China

Kim, Icksoo; Hong, Eunsuk; Shin, Jong Kook; Sun, Laixiang

Abstract

Despite China's attractiveness to foreign investors, intellectual property rights (IPR) protection in China has not caught up with international standards. This research aims to quantify the relationships between IPR violations, government effectiveness, and foreign direct investment (FDI) inflows in the context of China. Our econometric modeling and estimation based on provincial level data over 2002‐2012 show that in an early development stage of law and regulatory enforcement, the bad news of a rising number of IPR dispute cases signals the good news of an improvement in law and regulatory enforcement, which encourages IPR owners to raise legal cases. By contrast, in the later development stage, when law and regulatory enforcement has become much more effective, the bad news of a rising number of IPR disputes manifests itself as very bad news. Furthermore, this study confirms that FDI inflows enhance IPR protection through improving government effectiveness, and government effectiveness is one of the key factors promoting FDIs.

Citation

Kim, I., Hong, E., Shin, J. K., & Sun, L. Some Bad News is Good News for Foreign Investors: The Case of Intellectual Property Rights Infringement in China. Thunderbird International Business Review, 58(4), 317-329. https://doi.org/10.1002/tie.21782

• Journal Article Type: Article
• Online Publication Date: Jan 11, 2016
• Deposit Date: Dec 1, 2015
• Publicly Available Date: Jan 7, 2019
• Journal: Thunderbird International Business Review
• Print ISSN: 1096-4762
• Electronic ISSN: 1520-6874
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 58
• Issue: 4
• Pages: 317-329
• DOI: https://doi.org/10.1002/tie.21782
• Keywords: Foreign Direct Investment, Dual Track System of IPR Enforcement, IPR infringement, Local Protectionism, Government Effectiveness, China