1 Foreign Direct Investment and IP in Knowledge-based Development Ralph Heinrich UNECE Team of Specialists on Intellectual Property Minsk, 9-10 June 2010

2 The UN Economic Commission for Europe (ECE)

3 56 member countries home to 20 percent of the world’s population including most of the developed economies, but also emerging market economies and a few low income countries

4 What UNECE does  helps to implement global UN initiatives at the regional level  fosters sustainable development & economic cooperation in its region

5 What UNECE does fosters sustainable development & economic cooperation in its region by … providing a multilateral forum for policy discussion and negotiations brokering and administrating international standards and conventions engaging in capacity building and technical cooperation

6 UNECE’s main areas of activity Trans-border environmental issues Border-crossing transport issues Facilitation of international trade Trans-border energy issues International harmonization of statistics and Economic Cooperation and Integration

7 Committee on Economic Cooperation and Integration (CECI) Established in 2006 to promote “… a policy, financial and regulatory environment conducive to economic growth, innovative development and higher competitiveness focusing mainly on countries with economies in transition”

8 CECI - main areas of work promoting innovation and competitiveness public-private partnerships entrepreneurship Financing Innovation and Intellectual Property Rights

9 The Team of Specialists on Intellectual Property (TOS-IP) provides a forum for the exchange of experiences collects/ disseminates good practices and policy recommendations engages in capacity building and policy advice at national & sub-regional level

10 … through its network of experts representing –government ministries and agencies –the business community –international organizations and –academic institutions and its inter-governmental process

11 TOS-IP’s mandate helps to … “build up national innovation systems commercialize intellectual property improve the investment environment in creative, innovative and high technology industries … among others through effective enforcement of intellectual property rights”

12 Why Foreign Direct Investment? Source of financing, supplements domestic savings, enables more investment Provides access to global markets And better paying jobs TRANSFERS INT’L KNOWLEDGE

13 International Knowledge Transfer Key to Prosperity Knowledge is the basis for innovation Innovation is THE key driver of economic growth No country can/should go it alone Int’l KT is an opportunity for emerging economies to catch up to leaders

14 Why no country can/should go it alone Not all the smart people live here Innovation need not be globally new Can be smart combination of existing technologies Can be adaptation of existing technology to local needs

15 How Does FDI Transfer Knowledge? Through associated imports of advanced technology embedded in machines Transfer of intangible assets Production of advanced goods & services Skills & knowledge of expat managers Spillovers to host economy

16 How to Stimulate Knowledge Transfer via FDI? Encourage more FDI => Tax incentives, improvements in the general business climate But especially: the right kind of FDI ! I.e. in innovative sectors & activities => IPR policy may be important!

17 IPRs & Knowledge Transfer via FDI? On the one hand: secure IPRs are the basis for innovations to be made, to be published, and to be traded On the other hand: IPRs convey exclusivity & make imitation more difficult

18 So do stronger IPRs contribute to int’l knowledge transfer via FDI? An empirical question Research results mixed some skepticism from developing/emerging economies

19 So do stronger IPRs contribute to int’l knowledge transfer via FDI? Since TRIPS ’95, emerging economies have strengthened IPRs more than advanced economies and Have seen stronger FDI growth and Stronger increases in patenting (foreign and local)

20 Findings on transition economies: IPRs & volume & type of FDI Stronger patent rights encourage FDI Particularly in IPR-sensitive sectors And in manufacturing and R&D

21 Findings on transition economies: FDI & knowledge transfer FDI associated w/ more non-resident patent filings FDI associated w/ royalty payments from subsidiaries to parents

22 Spillovers to Domestic Innovation? Depends on complementary factors: Human capital Intensity of market competition Nat’l innovation system (actors & links) Finance

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