Essays on Vertical Cooperation, Intellectual Property Protection, and the International Development and Diffusion of New Technologies

In the first essay, we develop a theoretical model, to analyse the trade-off between two modes, vertical partnership and vertical merger, of the cooperation between a high-tech northern firm and a southern firm that has low-labour-cost advantage. We conclude that if there is high “importance/degree” of asymmetric information on the quality of the northern firm’s technology, the vertical partnership mode making it possible to screen out low-quality technologies, tends to arise as the equilibrium cooperation mode, rather than the vertical merger mode achieving higher overall cost efficiency. In the second essay, we examine empirically how two legal regimes of intellectual property protection in a country, patent protection and trade secret protection, affect the foreign-sourced R&D investment into the country. We find that both patent and trade secret protection may have positive or negative effects on the foreign-sourced R&D investment, but mostly, the dominant effects of both regimes on the foreign-sourced R&D investment are their positive effects that stem from the “appropriability” channel: both patent and trade secret protection can increase the appropriability of R&D achievements. Also, when patent and trade secret protection work for boosting the foreign-sourced R&D investment, the two regimes complement each other. In the third essay, we examine empirically how the manufacturing R&D investment and service R&D investment in a country, respectively, are affected by the patent protection and trade secret protection regimes in the country. We find that on the one hand, patent protection positively affects both the levels of R&D investment in manufacturing and in services. On the other hand, trade secret protection has no significant effect on the R&D investment in manufacturing, while our results weakly indicate a U-shaped effect of trade secret protection on the R&D investment in services.