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generally established to promote a nation's perceived self-interest and that, for a variety of reasons, the interests of different nations are best served by differing levels of intellectual property protection. Chapter 4 examines the question of economic effects of differentiated IPR regimes from the perspective of domestic welfare, under conditions of closed and open economies, and from the global welfare perspective.

The final chapter in this section, Chapter 5, addresses the economic effects of unauthorized use of intellectual property. Edwin Mansfield presents data on the effects of weak intellectual property protection on developing countries in terms of its influence on foreign direct investment and technology transfer. He also summarizes what is known about the economic effects of weak protection on innovating firms in terms of lost revenue and investment opportunities and the relationship between IPR protection and the rate of technological innovation.

Professor Mansfield articulates the central premise of one side of the IPR debate:

If intellectual property rights were weakened considerably, it could have unfortunate consequences. The incentives for industrial innovation, already relatively weak in industries where patents are ineffective and entry is easy, might wither to the point where the investment in new and improved products and processes would be far below the socially optimal level. Given the central importance of industrial innovation for economic growth, such an eventuality would do considerable harm, both to the United States and to other countries.

The possibility of negative effects on innovation and economic growth must be taken very seriously. This line of thought, however, should be contrasted with the view taken by Paul David in Chapter 2—that under some conditions IPRs can have seriously detrimental consequences for the processes of discovery and invention. Unfortunately, there is little empirical evidence on the effects of IPRs on invention and innovation under varying conditions that might help resolve the difference between these two views. This adds to the difficulty of reaching international agreement on the strength and scope of intellectual property protection.

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