Intellectual property rights protection and the surge in FDI in China

There is scarcity of empirical studies focusing on the role of intellectual property rights (IPR) in attracting FDI into developing nations, especially large economies with relatively strong threat of imitation. This paper examines the contribution of IPR to the recent surge in China's inward FDI. We consider two alternative measures of IPR and explore the possibility that the effect of IPR protection on FDI may vary by the level of economic development. Using a panel data for 38 countries, the empirical results indicate that the strengthening of IPR protection in China has a positive and significant effect on FDI. The results also show that FDI from Hong Kong and Taiwan behaves differently from the FDI originating from other high-income countries.