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Foreign Direct Investment and IP in

Knowledge-based Development

Ralph Heinrich

UNECE Team of Specialists on Intellectual Property

Minsk, 9-10 June 2010

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The UN Economic Commission for Europe (ECE)

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The UN Economic Commission for Europe (ECE)

• 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

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What UNECE does

helps to implement global UN initiatives at the regional level

fosters sustainable development & economic cooperation in its region

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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

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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

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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”

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CECI - main areas of work

promoting

• innovation and competitiveness

• public-private partnerships

• entrepreneurship

• Financing Innovation and

• Intellectual Property Rights

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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

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… through

• its network of experts representing– government ministries and agencies– the business community – international organizations and– academic institutions

• and its inter-governmental process

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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”

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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

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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

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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

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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

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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!

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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

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So do stronger IPRs contribute to int’l knowledge transfer via

FDI?• An empirical question

• Research results mixed

• some skepticism from developing/emerging economies

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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)

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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

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Findings on transition economies: FDI & knowledge

transfer• FDI associated w/ more non-resident

patent filings

• FDI associated w/ royalty payments from subsidiaries to parents

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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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Thank You!

• http://www.unece.org/ceci/Welcome.html

• mailto: ralph.heinrich@unece.org

• phone: +41 22 917 1269