Can licensing induce productivity? Exploring the IPR effect

Licensing is one of the main channels for technology transfer from foreign-owned multinational enterprises (MNEs) to domestic plants. This transfer, occurring within and across industries, results in technology spillovers that may affect both intra- and interindustry productivity. Intellectual property rights (IPR) legislation may increase (or reduce) this effect. Using Chilean plant-level data for the 2001–2007 period and an exogenous variation from an IPR reform in 2005, we explore whether or not IPR affects the spillover effects of licensing on productivity. We find that stronger IPR reduces backward spillovers but increases forward spillovers. Moreover, the IPR legislation effect is stronger on firms that are on average smaller, and have low productivity. Our results are robust not only to a series of definitions of IPR, licensing, and productivity, but also to a set of different specifications.