Patent Rights Protection, Multinational Companies Investment in China

Abstract: This paper evaluates the way that patents influence FDI in China. The theory suggests that a strong property right in terms of patents may benefit the inflows of FDI. An empirical study is conducted based on 31 provinces in China (not including Taiwan, Hong Kong and Macaw) during the period 1995-2007. The panel data method is chosen for the analysis in the study, with preliminary unit root test. The long run co-integration test and panel estimation show mixed results due to the different patent types. But overall, in China, the strengthening of IPRs in terms of increased absolute number of patents will surprisingly lead to less FDI.