Intellectual property rights as a driver of offshoring flows by stage of economic development

Abstract

This paper examines how the strength of intellectual property rights (IPR) affects offshoring between countries at different development stages. Using a panel dataset covering offshoring flows between 60 origin and 76 destination countries from 2000–2011—measured through intra-industry trade in intermediate inputs—we estimate several econometric models addressing heterogeneity, zero flows, endogeneity, and trade persistence. We find that stronger IPR protection reduces a country’s outward offshoring, especially in developing economies, while it increases inward offshoring, particularly in high-tech industries and when the destination is developing. These results show the varied role of IPR in shaping global production networks and suggest that strengthening IPR—especially in developing countries—can enhance participation in global value chains and promote technology transfer.