Innovating in countries with weak intellectual property rights

Abstract

Emerging countries have become attractive destinations for Multinational Enterprises (MNEs) to internationalize. By locating manufacturing and innovation activities such as research and development (R&D), MNEs can take advantage of opportunities like lower cost for human capital, local expertise, fast-growing markets, and a highly innovative environment. For the MNEs conducting innovative activities, a solid intellectual property (IP) strategy is decisive for the firm’s competitiveness as it offers protection for the innovations against competitors in highly innovative markets. A reliable legal system and favorable IP environment is the most essential requirement to protect intellectual property rights (IPRs). However, managers of MNEs that are considering moving innovative activities to offshore locations in emerging markets, seem to have to make a tradeoff between the enjoying the benefits the country had to offer, and not exposing themselves to higher risks for IP leakage and infringement.