سرمایه گذاری مستقیم خارجی و حقوق مالکیت معنوی: شواهد از توزیع جهانی فیلم ها و ویدئو های هالیوود

Traditional thinking about intellectual property rights (IPR) suggests that as a country strengthens its IPR standards, firms will move their governance structures away from equity based institutions such as foreign direct investment (FDI) towards more market-based relations such as licensing agreements. This hypothesis is explored by examining the behavior of Hollywood studios in both the feature film and video markets in 40 foreign countries. The analysis reveals that the behavior of Hollywood studios is more complex than this: although moderate IPRs are associated with a high degree of licensing, both high and low standards of IPR encourage more integrated governance structures.

The protection of intellectual property rights (IPR) has emerged as one of the most important considerations of contemporary international economic diplomacy. As firms have become increasingly dependent on copyrights, trademarks and patents to protect control of their goods and services in world markets, diplomatic efforts have sought to strengthen the protections available through a range of initiatives. The implications of these initiatives are a fundamental concern of many countries, especially those required to adopt a set of IPR standards that are higher than they would unilaterally desire. Central among these concerns is the impact of IPR reform on foreign direct investment (FDI). Sorting out this issue is subtler than one might first imagine, as FDI is only one option that a firm has for serving a foreign market. Depending on the technological characteristics of the product, a firm may have the option of serving an overseas market through exports, FDI or some form of licensing agreement. Therefore, the question of the relationship between FDI and IPR is fundamentally a question about how a multinational firm organizes its governance structure. Theoretical analyses of the various options have examined a rich set of circumstances chiefly from the perspective of contract theory.1 This literature predicts that the relationship between governance structure and IPR is determined by a number of competing forces. While no general model exists that encapsulates all the forces, it appears that some broad conclusions can be drawn. In particular, models that generate a negative association between FDI and IPR emphasize contract enforcement concerns, with this mechanism likely to be most pronounced when the initial level of IPR is low Ethier and Markusen, 1996 and Markusen, 1995.2 In contrast, models that focus on difficulty of contract design suggest that the incentive to conduct FDI is positively related to IPR (Chung, 1999). Ultimately, the relative contribution of the factors is an empirical question. To date, empirical work has found evidence that, at an aggregate level, the flow of royalties from licensing is more responsive to IPR than FDI flows, with both increasing in the standard of IPR (Smith, 2001).3 This has been interpreted as support for the hypothesis that as IPRs are increased, licensing is likely to be preferred to FDI. However, the degree of conflict between theoretical models and empirical findings is difficult to judge given that theoretical models operate at firm level while empirical evidence is based on country level data.4 Furthermore, the theoretical models are concerned with the choice of mode of service rather than size of investment.5 Hence, it is difficult for an analysis based on aggregate flows of royalties and foreign investment to compare the relative impact of IPR on these options of governance structure.6 Another difficulty is that the use of country level data obscures the degree to which different sectors are sensitive to IPR, a prominent stylized fact (Mansfield, 1994). This paper addresses these issues directly by matching the unit of analysis of the data to the unit of analysis of the theory.7 In particular, the paper examines the governance structures of major Hollywood studios in 40 foreign markets. The data describe the governance structures in both the distribution of feature films and their subsequent distribution on video. One advantage of analyzing the behavior of major Hollywood studios is that it highlights one aspect of the theory. Due to the technological characteristics of its output, the chief issue facing Hollywood studios is the internalization question (FDI or license) rather than the location question (export or produce abroad). So, the main decision that a studio has to make is whether its presence in a foreign market is most profitable in the guise of an affiliate or an agent. Focusing on this one aspect makes the empirical analysis much clearer and delineates the impact of IPR on internalization from its impact on the location decision.8 Given the high upfront costs and the relatively low cost of duplication, the success of Hollywood relies not only on the ability to protect its intellectual property both within the US but also in foreign markets. Indeed, foreign markets now account for a greater share of revenue than the domestic US market, a situation that has contributed to the audio-visual sector being ranked as the second largest exporter for the US.9 The global success that Hollywood has enjoyed also means it is often cast in the role of villain in debates over IPR standards; a dominant player seeking to further drive home its advantage by requesting that countries raise their standards of protection. This tension mirrors the pattern of IPR negotiations in general, and so provides a valuable and accessible template for exploring the implications of IPR reform more broadly. The variation in standards of IPR around the world offers one potential way of studying the association between IPR and governance structure. Based on this variation, the empirical analysis confirms the non-monotonic relationship suggested by the theory. In particular, increasing IPR from a relatively low base tends to increase the attractiveness of licensing relative to FDI. However, beyond a point, further increases in IPR are associated with an increase in the likelihood of FDI. In addition to being consistent with the theory, empirical results suggest that IPR can have a pronounced impact on the governance structure of a multinational firm. Reforms that see IPR increased from a low level to a medium level are likely to result in 18–40% of the relationships converted from FDI to licensing agreements. Similarly, reforms that raise IPR from medium levels to high levels are predicted to change 20–60% of the relationships from licensing agreements to FDI. These results are large and suggest that IPR reform may have profound effects on the international organization of firms and the resources they control. Finally, an important general point emerges from a comparative analysis of the feature film and video markets. While these markets are characterized by a similar general behavior, analysis reveals that there are in fact pronounced differences between these markets in how responsive studios are to changes in IPR. So even within industries the responsiveness of firm behavior to IPR is likely to be critically dependent on both the nature of the product and the degree of competition it encounters. These results augur against any simple prediction about the implications of IPR reform for FDI, instead suggesting that the nature and magnitude of the impact of IPR reform will depend not only on the characteristics of the product but also on the initial standard of IPR. In order to establish these results, this paper is structured as follows. Section 1.1 reviews the theory and formulates a number of hypotheses to be tested. Section 1.2 describes the data set and sets out the econometric methodology. Section 1.3 presents the results of empirical analysis.

A central issue in recent debates over IPR reform is the potential impact on foreign direct investment. Previous empirical studies have put emphasis on a potentially negative relationship between IPR and FDI, a relationship that has been attributed to firms preferring to use market-based licensing agreements if intellectual property rights are sufficiently secure. However, these studies have relied on aggregate data, a limitation that makes it difficult to draw inferences about firm level behavior. Unlike the previous literature, this study uses firm level data, which enable a more exact match between theory and data. This match is particularly critical in this setting. While theory does provide some guidance in thinking about the implications of IPR reform for the optimal choice of mode for foreign market service, ambiguities do arise. Given the nature of these ambiguities, the relationship between IPR and FDI is likely to vary with the characteristics of the industry. Therefore, aggregating over industries is likely to obscure much of the subtle detail, confounding efforts to interpret the results. By studying firm behavior in a particular industry, this paper is uniquely placed to shed light on the subtleties of the relationship between IPR and FDI. In relation to these subtleties, the behavior of major Hollywood studios is particularly interesting. Not only is Hollywood one of the major export earners for the United States, but is also critically dependent on the protection of intellectual property rights for its success. Analysis of this industry reveals that nuances suggested by theoretical models are present in the data. In particular, as suggested by theory, a non-monotonic relationship between IPR and FDI characterizes the behavior of Hollywood studios abroad: while Hollywood studios are likely to service a foreign market through an affiliate if the standards are either low or high, they are more likely to enter into a licensing agreement if a country offers a moderate degree of IPR protection. This pattern characterizes Hollywood's behavior in both feature film distribution and video distribution markets. Further support is added to these results as a number of ancillary predictions of the theory relating to market size and the potential threat from pirates also find strong support in the data. The robustness of these results allows an important general point to emerge from a comparative analysis of the feature film and video markets. Even though these markets are characterized by a similar general behavior, there are marked differences between these markets in how responsive studios are to changes in IPR. Thus, even within industries, the responsiveness of firm behavior to IPR is likely to be critically dependent on both the nature of the product and the degree of competition it encounters. These results argue against any simple prediction about the implications of IPR reform for FDI, suggesting instead that the nature and magnitude of the impact of IPR reform will depend not only on the characteristics of an industry but also on the initial standard of IPR.