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developing country. Also, the answer may vary depending on the nature of the technology.

VI. INTELLECTUAL PROPERTY RIGHTS PROTECTION AND DIRECT FOREIGN INVESTMENT

To test the foregoing hypotheses concerning the effects of intellectual property rights protection on the transfer of technology via foreign direct investment by American firms, I chose a random sample of 100 major U.S. firms in six industries—chemicals (including drugs), transportation equipment, electrical equipment, machinery, food, and metals.3 Information was requested from each firm concerning the importance of intellectual property rights protection to whether or not the firm would make direct foreign investments of various kinds. Complete or partial data were obtained from 94 of the firms, a very high response rate. The respondents were a mixture of patent attorneys, specialists in the firm's international operations, and top executives. The limitations of survey and interview data of this kind are well known, but with proper caution, such data can be useful.

In practically all of these industries, the proportion of firms indicating that intellectual property rights protection has a strong effect on their foreign direct investments depends heavily on the type of investments in question (Table 5-1). For investment in sales and distribution outlets, only about one-fifth of the firms reported that intellectual property rights protection was of importance. For investment in rudimentary production and assembly facilities, less than one-third said that such protection was important.4 However, for investment in facilities to manufacture components or complete products, about half said it was important, and for investment in R&D facilities, about four-fifths said it was important.

Also, some industries, more than others, regard intellectual property rights protection as important. For all types of investments other than in sales and distribution outlets, the chemical industry (which includes pharmaceuticals) has the highest percentage of firms regarding intellectual property rights protection as important in this regard. The food and transportation equipment industries tend to have the lowest percentages, and the electrical equipment, metals, and machinery industries tend to rank in the middle. It

3  

The frame for this sample was the comprehensive list of major firms in Business Week, June 15, 1990; see Mansfield (1991) for details. Note that our results pertain only to U.S. firms. Firms from other countries may have different views concerning the role and importance of intellectual property rights.

4  

Rudimentary production and assembly facilities are ones involving basic technologies that are reasonably well known to all firms in the relevant industry.



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