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Past Issue • Jan-Mar 2016

Swimming in cold waters: How MNFs protect IPR in weak IP regimes

Swimming in cold waters: How MNFs protect IPR in weak IP regimes

Multinational firms (MNFs) use a variety of project selection and organisational mechanisms to make up for weak intellectual property rights (IPR) regimes in countries such as India and China, to which they offshore research and development (R&D) activities. Professor Nandkumar’s research reveals that these mechanisms enable MNFs to prevent both patentable and unpatentable knowledge from leaking out to rivals, thereby making offshoring of R&D possible even when the legal mechanisms to protect knowledge are either nonexistent or weak.

Increasing international trade between nations has coincided with a surge in MNFs conducting their R&D activity overseas in countries such as India and China. Fortune 500 firms have about 100 R&D laboratories in China and about 63 in India. Moreover, according to a survey by The Economist, about 83% of the new R&D centres added by Fortune 1000 firms are located in India and China. This trend, surprisingly, has continued despite concerns of weak IP regimes in these countries and is primarily driven by a need to access the talent and knowledge available in these countries. In the same survey, about 84% of the surveyed managers were of the opinion that a weak IP regime was a major impediment in conducting R&D in these countries. In a series of papers we explored this rather paradoxical trend: How do MNFs manage to conduct R&D at host destinations such as India and China despite concerns over not being able to protect their innovations?

ABOUT THE AUTHORS

  • Anand-N

    Anand Nandkumar

    Assistant Professor of Strategy at the Indian School of Business (ISB).
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