Offshoring and intellectual property rights reform

This paper empirically assesses the responsiveness of US offshoring to intellectual property rights (IPR) reforms in 16 countries. We construct a measure of US offshoring at the industry level based on trade in intermediate goods, covering 23 industries for the period 1973-2006. For each industry, we differentiate between broad offshoring and intra-industry offshoring activities. We conduct a difference-in-difference analysis using the IPR reform years proposed in Branstetter et al. (2006, Quarterly Journal of Economics). We find that following IPR reform, neither broad nor intra-industry offshoring intensities change for the typical US industry at conventional levels of significance. However, high-tech (patent-sensitive) industries substantially expand their intra-industry offshoring activities, whereas low-tech (patent-insensitive) industries do not change their intra-industry offshoring activities in a statistically significant way. In addition, high-tech industries increase their broad offshoring relative to low-tech industries, but the effects are smaller and less robust than those estimated for intra-industry offshoring.