Research On The Impact Of China's IPR Protection On FDI

In recent years, China has been repeatedly urged to strengthen the protection of intellectual property rights (IPR) by developed countries. Meanwhile, FDI has been gradually transferring towards hi-tech industry, which highlights the importance of IPR protection. Against this background, the impact of IPR protection on FDI has been given close attention by both government and academic community.The relationship between IPR protection and FDI has always aroused heated controversy. Some scholars insisted that the enhancement of intellectual property system could reduce the risk of IPR violation, guarantee satisfactory return of investment (ROI) and therefore promote FDI inflows. Nonetheless, others questioned this view and argued that strengthening IPR protection might lead to crowding out and substitution of FDI, which engendered a decrease in FDI inflows. Still, numbers of scholars stressed that there was uncertainty about the effects of IPR on FDI since it was conditioned by the industry, the sector and market capacity of the host county where FDI went.Based on previous studies, we analyze the present condition of IPR and FDI in China, aiming to research deep into their potential relationship through phenomena. Here we focus on technology-intensive industry and find out the changing trend of IPR protection has coincided with that of FDI inflows, which might suggest there exists a correlation between IPR protection and FDI.In order to verify the correlation stated above, we study the impact of IPR protection on FDI inflows theoretically and empirically. In theoretical perspective, given that different industries have different levels of insensitivity to IPR, we designate'labor per unit of output'as criteria to distinguish technology-intensive industries from labor-intensive industries. The analysis shows by improving IPR protection, FDI can be encouraged towards technology-intensive industries while discouraged towards labor-intensive industries.In empirical perspective, the relationship between IPR protection and FDI is studied both integrally and at industry level. The empirical test well confirms the theoretical results. Besides, we examine the regulative effect of host country's market capacity on the correlation between IPR protection and FDI. It is found that for labor-intensive industry, the impact of IPR protection on FDI becomes greater with market capacity enlarged; as for technology-intensive industry, the impact becomes smaller.On the basis of the above findings, finally we draw conclusions and put forward our policy suggestions that IPR protection should be improved to enhance utilization of FDI inflows to China.