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Friday, September 17, 2010

New OECD Study Finds That Improved IPR Protections Benefit Developing Countries
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The Organization for Economic Cooperation and Development (OECD) just released a useful new study entitled Policy Complements to the Strengthening of IPRs in Developing Countries. It significantly undermines the claims of "public interest" advocates who wail that they just know intuitively that improved legal protection for intellectual property rights (IPRs) are merely one more means through which developed countries oppress developing countries. While such claims often sound lofty and compassionate, very ugly prejudices often lurk beneath them. Fortunately, by actually studying real data, the OECD found that such claims are wrong as applied to actual developing countries: "[T]the results point to a tendency for IPR reform to deliver positive economic results."

To assess the effects of improved IPR protections upon developing countries, the OECD conducted multi-level macroeconmic, microeconomic and case-study analyses. It found that for developing countries, "all three analytical approaches... point to a tendency for IPR reform to deliver positive economic results."

The OECD study is also valuable because it stresses a point that I have long stressed--the importance of what the OECD calls "complements" in securing the economic benefits that improved IPR protections can produce: "Examples include policies that influence the environment for doing business, investment in research and development (R&D), development of human capital and entrepreneurial education (e.g. concerning the economic potential of intellectual property)."

This is a critical point. Intellectual property rights are intended to empower markets to promote the private production of social goods like expression, reputation for quality, and innovation. But these intangible or "intellectual" property rights seek to achieve these ends by granting exclusive rights. And while the exclusive rights granted by IPRs often differ in their details because intangible property rights always raise context-specific concerns, the exclusive rights granted by IPRs are, nevertheless, intended to produce--in markets for expression, reputation, and innovation--effects similar to those produced in markets for tangible goods by the exclusive property rights that we grant to producers of such goods. These observations thus suggest that we should expect to find what the OECD study actually found: A country can improve the efficacy of IPRs in producing economic growth by improving IPR protections and then by making improvements in the "complements" that will tend to improve both the efficacy of IPRs and the business climate generally.

Consequently, perhaps the most interesting OECD finding is that improved IPR reforms can trigger a "virtuous cycle" of complementary improvements. OECD notes that IPR reforms tend to trigger increases in foreign direct investment (FDI), that then trigger more general improvements in the "complements" that improve the general business climate. As OECD puts it: "[T]he significance of the results across the system of equations points to a virtuous circle, whereby improvements in the IPR environment are associated with improved economic performance - in particular with respect to FDI - and, in turn, further improvements in the IPR environment."

In short, this is a useful and generally cautious new multi-level analysis of the effect of improving IPR protections in developing countries. It should highlights the need for further research to improve our understanding of the roles of improved IPR protections and improvements in "complements" that improve both the prospects of both IPR-intensive enterprises and a country's general business climate. To the extent that improved IPR protections tend to generate improvements in complements important to businesses generally, then the true economic benefits of improved IPR protections may be far greater than even this new OECD study might suggest.

posted by Thomas Sydnor @ 12:27 PM | Capitalism , Copyright , Global Innovation , Human Capital , IP , Innovation , Internet

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