Intellectual Property Protection and Foreign Direct Investment: A Global Pharmaceutical Industry Perspective
P. M. RAO
Intellectual property protection (IPR) is only one of many factors that influence foreign direct investment (FDI) decisions, even in the pharmaceutical industry where great importance is attached to it. The recently concluded Trade Related Intellectual Property Rights (TRIPs) Agreement under the Uruguay Round will have little effect on the flow of pharmaceutical FDI into the developing countries. Increasingly, global marketing strategies--driven by market forces and technological developments in the industrialized world--are likely to increase the degree of involvement by pharmaceutical multinationals with the developing world.
Few facts are better established in modern economics literature than that industrial innovation in the form of new products and processes has been a major source of U.S. economic growth ( Denison, 1985; Kendrick, 1980; Mansfield et al., 1977; Solow, 1957). The stock of knowledge that firms produce and maintain through investments in research and development, together with the training of workers and similar activities, constitute the asset base, albeit an intangible one, which is often referred to as intellectual property. Although the term intellectual property can be defined to include a wide range of intangible "assets" described in such terms as knowledge base and knowhow, for purposes of this chapter, it is grounded in investments in technology and property rights and refers to all technology-based intangible assets of a firm--an idea or a design for a new product or a process, a new molecular entity, a computer software package and the like--that may be protected as a property right under the legal framework that includes patents, copyrights, trademarks or trade secrets.