International Studies Reivew Vol. 13 No.1 June 2012

pages: 19-41

This paper investigates the impacts of IPR protection in foreign
countries on Korea's export performance. The empirical analysis
in this paper differs from those in previous studies in several respects.
First, the impact of IPRs is firstly forced to be uniform across
sectors and then is allowed to differ across sectors so that industry-
specific evidence can be documented. Second, in order to
analyze the impact of IPR protection on trade, we employ the
random-effects model to incorporate differences between cross-sectional
entities by allowing the intercept to change, but the amount
of change is random. Third, the study is based on an analysis
of the most recent panel data which allow the patent regime to
change over time. Finally, this study provides new evidence regarding
the linkage between IPRs and trade with a focus on Korea. Our
major findings are summarized as follows. First, reinforced IPR
protection in foreign countries has a positive effect on Korea's total
exports, indicating the dominance of market expansion effects.
Second, stronger protection of IPRs induces Korea's exports to all
foreign countries regardless of their level of development. The effects
are stronger in medium-income and high-income countries. Third,
Korea tends to export more to countries with strong imitative
ability when the IPR protection in those countries is strengthened.
Finally, stronger protection of IPRs in foreign countries with weak
imitative ability leads to an ambiguous reduction in Korea's exports.
Efforts to increase the GDP, improve social infrastructure, accelerate
domestic reforms (openness to trade), and strengthen IPR protection
in foreign countries are suggested as a remedy for obstacles to
Korea's exports. Importantly, strengthening of IPRs would have
the greatest effect if foreign GDP also rose.