Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

This paper investigates the role of protection of intellectual property rights (IPR) in technology spillovers through foreign direct investment (FDI) inflow, which has not been examined in previous studies. For this purpose, this paper uses the index of IPR protection as an additional instrumental variable for the correction of endogeneity problem between FDI and total factor productivity (TFP). The empirical results for 67 developing countries over 1970-1997 period observe technology spillovers through FDI in which IPR variable plays a substantial role. IPR as an additional key instrumental variable improves the empirical results. In addition, both education and trade share in GDP also play positive roles in both attracting more FDI and raising TFP. Both market size and per capita capital stock are considerable factors for hosting more FDI as well. However, since this paper uses aggregate data for FDI, it requires another research using disaggregate data at firm or industry level in high R&D-intensive sector in which IPR will play more sensitive role in hosting FDI.