Globalization and Intellectual Property
Friday, Jan. 4, 2019 10:15 AM - 12:15 PM
- Chair: Wendy Li, U.S. Bureau of Economic Analysis
Globalization and Inequality in Innovation: A Perspective from U.S. R&D Tax Credit Policy
AbstractMany OECD countries have adopted R&D tax credit policy to encourage innovations, especially for small firms. Although studies show that small firms are more innovative than large firms, public reports show that large firms dominate the R&D investments not only domestically but also globally. NSF reports that large firms conduct more than 80% of manufacturing R&D and OECD reports that only 250 companies conduct more than 60% of global R&D. Moreover, small and medium enterprises (SMEs) are more vulnerable in global competition. Therefore, it is important to investigate whether the U.S. R&D tax credit policy stimulates SMEs to invest more in R&D, whether firms exhibit different R&D investment patterns across industries, how the differences relate to the degree of their response to the tax policy and the degree of their exposure to import competition. To our knowledge, there is no research answering those questions. This research aims to fill in the gap. The data, including our newly constructed tax credit dataset, cover the period of 1998 to 2014. Our preliminary findings are: First, after the newly enacted U.S. R&D tax credit policy in 2009, more SMEs are eligible and qualified for R&D tax credit and the value of our R&D inequality index declined dramatically after 2009. Second, the tax policy can favor either large firms or SMEs depending on the industry. Third, import competition can negatively affect U.S. innovation but the negative effect can be mitigated as the degree of R&D inequality increases. Fourth, rather than from China, import competition from Germany is negatively associated with U.S. innovation. Fifth, the degree of R&D inequality has a statistically positive relationship with U.S. innovation, a result that supports Harberger (1998) sun-rise and sun-set phenomenon – a small or modest set of firms can account for 100 percent of productivity growth in an industry.
Using Intellectual Property Data to Measure Cross-border Knowledge Flows
AbstractGlobalization and digitization have fundamentally changed the volume, form and content of international trade and cross-border information flows. Traditional determinants of trade such as natural resource endowments and transportation costs are becoming less important. Intangible assets increasingly define product characteristics and add value to tradable outputs. At the same time, customers are demanding more diverse and sophisticated products in international markets. Scholars have incorporated many features of this new environment into their theoretical models and empirical studies, but the translation of their work for policymakers lags behind. At least in part, this is due to the volume and scope of the academic literature on cross-border trade in knowledge. Particularly important for policymakers is the empirical strand of this literature, which is increasingly using intellectual property rights (IPRs) data (e.g. patent information) to test theoretical constructs. A better understanding of the uses and interpretations of IPR metrics for characterizing trade in knowledge would help inform policy discussions and promote evidence-based policymaking. This paper surveys the landscape of empirical studies on cross-border trade in knowledge that use IPRs data. Based on a thorough search of the literature, we identify and categorize the types and uses of IPR data. Our discussion critically evaluates the interpretations offered in the literature and suggests new opportunities to use IPR data. The goal is to provide a “guide” that will be useful to policymakers and scholars interested in how IPRs data are used and interpreted in the trade in knowledge literature.
FDI Return Differentials: An Explanation Based on Offshore Profit Shifting
AbstractWhile much has been written about the implications of offshore profit shifting by multinational enterprises for the U.S. tax base, little is known about the effects of profit shifting on measurement in the domestic economy. Using unpublished firm-level data from the Bureau of Economic Analysis, we develop a methodology to measure the profits shifted offshore by U.S. multinational enterprises. In 1990, profit shifting was less than one percent of U.S. private business sector value-added. By 2008, profit shifting was about 2.5 percent of U.S. private business sector value-added. Reattributing these profits back to the U.S. economy increases U.S. GDP. How does this affect measurement of the U.S. economy?
In prior work, we have shown that adjusting for profit shifting under our methodology adds to GDP and productivity growth rates for 1994-2008, partially mitigating the productivity slowdown found in official statistics. We have also demonstrated that profit shifting matters for measurement of core economic accounting aggregates other than GDP, such as income receipts on foreign direct investment, trade balances, and the international investment position. In this paper, we focus on implications of adjustments obtained under our methodology for returns on U.S. direct investment abroad, which have been historically higher than returns on foreign direct investment in the U.S.This work demonstrates the effects of challenges faced by economic accountants as a result of structuring in multinational enterprises for purposes other than production, which is made possible by the mobility of intangible capital in an increasingly global economy.
- F0 - General
- O3 - Innovation; Research and Development; Technological Change; Intellectual Property Rights