Offshoring and intellectual property rights reform

Abstract

This paper empirically assesses the responsiveness of US offshoring to intellectual property rights (IPR) reforms in 16 countries. We construct a measure of US offshoring at the industry level based on trade in intermediate goods, covering 23 industries for the period 1973–2006. For each industry, we differentiate between broad offshoring and intra-industry offshoring activities. We conduct a difference-in-difference analysis using the IPR reform years proposed in Branstetter et al. (2006, Quarterly Journal of Economics). We find that following IPR reform, neither broad nor intra-industry offshoring intensities change for the typical US industry at conventional levels of significance. However, high-tech (patent-sensitive) industries substantially expand their intra-industry offshoring activities, whereas low-tech (patent-insensitive) industries do not change their intra-industry offshoring activities in a statistically significant way. In addition, high-tech industries increase their broad offshoring relative to low-tech industries, but the effects are smaller and less robust than those estimated for intra-industry offshoring.