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The effects of intellectual property rights protection in the
technology transfer context on economic growth: the case

of developing countries
Fatma Mrad
Dans Journal of Innovation Economics & Management 2017/2 (n° 23), pages 33 à 57
Éditions De Boeck Supérieur
ISBN 9782807391123
DOI 10.3917/jie.023.0033
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THE EFFECTS OF INTELLECTUAL
PROPERTY RIGHTS PROTECTION
IN THE TECHNOLOGY
TRANSFER CONTEXT ON
ECONOMIC GROWTH: THE CASE
OF DEVELOPING COUNTRIES
Fatma MRAD
University of Sousse, Tunisia.
mrad.fatma@yahoo.fr
ABSTRACT
The objective of this paper is to estimate an econometric model for analyzing the effects
of intellectual property rights (IPRs) on technology transfer through the importation of

capital goods, and on economic growth in 48 developing countries, signatories to the
Agreement on Trade-Related Aspects of Intellectual Property Rights of the WTO, by using
the simultaneous-equations model estimated by Seemingly Unrelated Regressionsduring
the period 1970–2009. Our empirical results show that IPR protection positively affects
economic growth in developing countries by attracting foreign technology embodied in
capital goods. In addition, a developing country’s membership of the WTO promotes and
encourages technology transfer through the liberalization of international trade.
Keywords: Protection of Intellectual Property Rights, Technology Transfer, International
Trade, Economic Growth, Simultaneous Equations Model
JEL Codes: C33, F130, O33, O34, O47
Recently, there has been an awareness of the importance of intellectual

property rights (IPRs) in international trade negotiations. This awareness
has been demonstrated by the creation of an integral component of World
Trade Organization (WTO) agreements, the Agreement on Trade-Related
Aspects of Intellectual Property Rights (the TRIPS Agreement), which aims
to harmonize standards of intellectual property (IP) between the signatory
countries. This is the agreement of the Final Act of the Uruguay Round
(1986-1994), which came into force gradually in January 1995. In order to
n° 23 – Journal of Innovation Economics & Management – 2017/2 33

Fatma MRAD
be part of the WTO and to benefit from the advantages of free trade, devel-
oping countries were requested, not only to enforce IPRs protection but also
to make their IPRs systems conform to specific standards already operating
in developed countries. Under this scheme, developed countries would be
willing to export their technologies, embedded in goods to developing coun-
tries. Article 7 of the Agreement states that “The protection and enforcement
of intellectual property rights should contribute to the promotion of technologi-
cal innovation and to the transfer and dissemination of technology, to the mutual
advantage of producers and users of technological knowledge and in a manner con-
ducive to social and economic welfare and to a balance of rights and obligations”.
The signing of WTO’s Agreement on TRIPS has generated heated
debates in political arenas and among academics. One important debate is
whether it is advantageous for a developing country to strengthen its own
IPRs regime and to make it conform to specific standards already operating
in developed countries.
It is possible to identify two opposite models in this contemporary debate.
The first recommends a strong regime of IPRs for economic development,
and a second argues that weak IPRs protection, or even the absence of IPRs,
is a way to allow the rapid diffusion of knowledge and the building up of
local capabilities.
Supporters of strong IPRs argue that improvements in IPRs protection

will not only be beneficial for developed countries, but also for developing
ones. On the one hand, companies in the North will find sufficient incen-
tives to invest in research and development (R&D) and innovation. On the
other hand, they may be in favor of licensing the knowledge and collaborat-
ing with companies in the South on common projects. Developing countries
will benefit from greater inflows of technology transfer (Filippetti, Archibugi,
2015; Awokuse, Yin, 2010). Critics of IPRs protection, on the contrary, have
claimed that strengthening IPRs protection can lead to increased prices that
distort consumer choice and reduce welfare. They have argued that a strong
IPRs regime can reduce technology transfer by limiting the extent of imita-
tion, which makes it difficult to narrow the North-South technological gap
(Filippetti, Archibugi, 2015; Falvey, Foster, 2006; Chen, Puttitanun, 2005).
When developing countries harmonize their IP standards to match those of
developed countries, they will assume short-term costs caused by rent trans-
fers and administration and enforcement outlays, taking scarce resources
away from other crucial sectors (Dutfield, Suthersanen, 2005).1
1. For a literature review on the effect of stronger IPRs protection in the South on northern
innovation, see Park (2012) and Ivus (2010).
34 Journal of Innovation Economics & Management – 2017/2 – n° 23

The Effects of Intellectual Property Rights Protection
in the Technology Transfer Context on Economic Growth
Due to the WTO’s interest in IPRs and the existence of controversy about
their role in a North-South axis, it seems necessary to empirically explore the
nature of the relationship between IPRs protection and technology transfer,
and its impact on economic growth in developing countries. By far the most
important source of technology transfer, as perceived by firms, is imports of
technology embodied in machinery and other capital goods, according to a
large-scale survey of firms in developing countries (Knell, 2006).
Therefore, this paper investigates the role of IPRs protection in facili-
tating technology transfer via international trade in capital goods, and its
contribution to economic growth in developing countries, signatories to the
TRIPS Agreement of the WTO.
Empirical models examining the economic implications of strengthening
IPRs in developing countries have provided different views on the impact of
IPRs protection on growth. According to Gould and Gruben (1996), IPRs
protection stimulates economic growth if it is accompanied by a policy of
trade liberalization. By encouraging initiatives to innovate, IPRs protection
may influence the economic growth of an open country. Park and Ginarte
(1997) found that IPRs protection affects economic growth indirectly by
stimulating the accumulation of factors of production such as physical
capital and R&D capital. IPRs protection encourages the research sector
to invest and take risks. This consequently stimulates economic growth.

Xu and Chiang (2005) show that IPRs protection affects economic growth
indirectly by attracting flows of foreign patents. Falvey and Foster (2006)
found that the relationship between IPRs protection and economic growth
is nonlinear. It depends on the level of development of a country, as well as
the structure of its economy. However, all these studies have ignored the
impact of IPRs protection on technology transfer and economic growth.
Compared to the literature, this study seeks to estimate the effects of
IPRs protection on technology transfer through the importation of capital
goods, and on economic growth in the case of developing countries, using a
two-equation model. This model is estimated on panel data for 48 develop-
ing countries, signatories to the TRIPS Agreement of the WTO, with data
averaged over eight five-year periods between 1970 and 2009.
The rest of the paper is organized as follows. In section 2, we review
the theoretical linkages between IPRs protection, technology transfer and
growth, section 3 presents the empirical framework, section 4 discusses the
results obtained, and the last section concludes.

Fatma MRAD
PROTECTION OF INTELLECTUAL PROPERTY

RIGHTS, TECHNOLOGY TRANSFER
AND ECONOMIC GROWTH:
NORTH-SOUTH MODELS
Technology Transfer and Protection of Intellectual

Property Rights
According to the North–South theoretical literature, the nature of a stronger
patent system in developing countries’ influence on technology transfer is
ambiguous and dependscrucially on the channel of international production
transfer from North to South, and on the channels through which technology
can be transferred from North to South (foreign direct investment – FDI –,
licensing, and trade).
Helpman (1993) argues that tighter IPRs reduce technology flows from
developed countries to developing ones if imitation is the channel of inter-
national production transfer. Stronger IPRs increase imitation cost, they
restrict southern imitation, and shift production back to the North. In the
long run, innovation in the North may fall because fewer resources are avail-
able for innovation there. Lai (1998), on the other hand, argues that stronger
IPRs protection increases the rate of technology transfer if multinationali-

zation is the channel of production transfer, but has the opposite effect if
production is transferred through imitation. When FDI is the channel of
production transfer, strengthening IPRs protection is seen as an incentive
given by the South to encourage northern technology flows. Stronger IPRs
protection in the South would improve the incentives for innovation in
the North, and encourages northern FDI. This makes more northern labor
available for research.
According to other studies where licensing is assumed, the means by
which technology can spread internationally, the implications of stronger
IPRs protection in the South on technology transfer from the North to the
South, are not clear cut. Yang and Maskus (2001) argue that stronger IPRs
in the South incite firms in the North to license advanced technologies.
They increase the licensor’s share of rents and reduce the costs of licensing
contracts. Consequently, additional resources would be available for R&D.
Hence, stronger IPRs in the South are associated with increased innovation
in the North and technology transfer. Similarly, Yang and Maskus (2009)
show that stronger IPRs in developing countries would enhance technology
transfer through licensing and reduce the South firm’s marginal production
cost, thereby increasing its competitiveness in the international markets.

They argue that stronger IPRs protection may improve the ability of firms
in developing countries to enter export markets. In contrast to these stud-
ies, Yang et al. (2016) show that a stronger patent system’s ability to attract
better technology depends on the strength of two factors: its effect on tech-
nology transfer cost and its effect on knowledge spillover. A stronger patent
system decreases (increases) the quality of the technology to be transferred
in the reforming country if its effect on knowledge spillover is stronger
(weaker) than its effect on the technology transfer cost.
Like the other channels of technology transfer, ambiguous conclu-
sions on the impact of IPRs protection in the South on international trade
are drawn from the theoretical literature. According to Maskus and Yang
(2013), strengthening IPRs protection in developing countries encourages
inward technology transfer via trade. They argue that because strength-
ened patent rights can expand technology transfer, such reforms could in
turn improve a country’s export performance by enhancing the productiv-
ity of local enterprises. However, Smith (2001) argues that stronger IPRs
protection positively affects technology transfer via trade, under certain
circumstances. More specifically, the impact of stronger IPRs protection on
technology transfer occurring through imports depends on two contradictory
effects: a ‘market expansion’ effect and a ‘market power’ effect. Strengthening
IPRs protection can positively affect trade if the ‘market expansion’ effect
dominates the ‘market power’ effect. According to the first effect, trade is

positively correlated with the effectiveness of protection in the importing
country. Strengthening IPRs protection can reduce counterfeits, resulting
in an increase in the request for innovative businesses. According to the
second effect, strengthening IPRs protection may have a negative effect on
trade flows. Greater protection allows the patent holder firm to reduce the
quantities exported through its monopoly power in the host country market,
and increases its price. The total effect depends on the imitation capacity of
the importing country (Smith, 1999).
Protection of Intellectual Property Rights

and Economic Growth
The effects of IPRs protection on economic growth have been analyzed by
a number of North-South models in theoretical literature, but mixed results
have been found. Much depends on the assumptions about the activities of
imitation and innovation in both regions.
From a North-South model, Grossman and Helpman (1991, Chapter 11)
analyzed the consequences of imperfect IPRs protection on technical pro-
gress and economic growth by assuming that innovation takes place only

Fatma MRAD
in the North and imitation only takes place in the South. According to
these authors, imperfect IPRs protection encourages imitation activity in
the South. Thanks to the increase in the number of imitation goods, the
southern stock of knowledge increases. Conversely, a strong IPRs protection
could reduce the rate of imitation. Due to the increased difficulty to imitate,
the duration of monopoly profits of the northern innovator is longer, and this
monopoly position lasts. The productivity of southern imitators decreases,
and the country’s stock of knowledge will not be stimulated. In contrast, the
imitation activity generates two contradictory effects on the North. The
positive effect is that technical progress is stimulated to the extent that the
northern firm innovates to survive under the pressure of low-cost southern
imitators. The negative effect is due to the disappearance of the rent of the
innovator from the moment the variety of a product is imitated.
However, assuming a co-existence of imitation and innovation in devel-
oping countries, Hwang et al. (2016) show that the economic effects of IPRs
protection vary according to the level of economic development. Tighter
IPRs protection reduces the varieties of the intermediate goods and raises
the production cost of the final good. These effects rise and then decline
with income. Therefore, the relationship between the less-developed coun-
tries’ IPRs protection and economic development is U-shaped. This implies
that a country’s willingness to strengthen its IPRs protection first decreases
and then increases with its income.

To sum up, theoretical predictions about the effects of IPRs protection
on technology transfer and economic growth are ambiguous. A clear picture
can appear from an empirical study. In this paper, an econometric approach
is chosen to answer this question by focusing on only one channel of tech-
nology transfer: imports of capital goods.
EMPIRICAL FRAMEWORK
To investigate the empirical relationship between IPRs protection, technol-
ogy transfer through capital goods imports, and economic growth, we specify
and estimate a simultaneous equations model. It contains two equations:
the first for the total factor productivity (TFP) growth rate, and the second
for technology transfer through the importation of capital goods. Based on
literature, we determine the set of explanatory variables appearing on the
right-hand side of each equation.
The model will be estimated for a sample of 48 developing countries. It
covers a sample of developing countries which are signatories to the TRIPS
Agreement of the WTO, contracting parties of the World Intellectual

Property Organization Convention, and contracting parties of the Paris

Convention for the Protection of Industrial Property.
The developing countries are: Argentina, Bangladesh, Benin, Bolivia,
Brazil, Cameroon, Central African Republic, Chile, Colombia, Costa Rica,
Dominican Republic, Ecuador, Egypt, Salvador (El), Ghana, Guatemala,
Honduras, India, Indonesia, Israel, Jamaica, Jordan, Kenya, the Republic
of Korea, Malawi, Malaysia, Mauritius, Mexico, Nepal, Nicaragua, Niger,
Pakistan, Papua New Guinea, Paraguay, Peru, the Philippines, Rwanda,
Senegal, Singapore, South Africa, Sri Lanka, Thailand, Trinidad and
Tobago, Tunisia, Uganda, Uruguay, Venezuela and Zambia.
The Links between Technology Transfer through

the Importation of Capital Goods, IPRs Protection
and Economic Growth: Equation 1
For the first equation, we assume that technology transfer through capital
goods imports is a determinant of TFP growth rate. In the technology trans-
fer literature (Connolly, 2003; Coe et al., 1997; Grossman, Helpman, 1991),
thanks to openness on international trade, imports of a country may relate
to varieties of capital goods that are not available on the domestic market.
Similarly, following the liberalization of capital goods, domestic producers in
a country can use domestic and foreign inputs for the production of the final

good. Moreover, trade in capital goods gives an advantage to developing
countries in terms of new knowledge made in advanced countries.
Indeed, the import of capital goods is not the only way by which inter-
national trade may affect TFP growth. Grossman and Helpman (1991) have
identified the channels through which trade can have an effect on growth.
Alongside its role in technology transfer, trade contributes to improving the
production efficiency of a country, insofar as it allows it to benefit from the
positive effects of competition and economies of scale. Openness promotes
efficient allocation of resources and leads to an optimization of production
processes. To capture the latter effects, we have opted for the inclusion of a
measure of trade openness as a determinant of TFP growth rate. The volume
of exports and imports as a share of total GDP; often referred to as the “trade
openness ratio” will be used as a measure of the openness of a country.
Furthermore, developing countries import capital goods from devel-
oped countries since they are more advanced in terms of technology. These
imports are expected to promote technological catch-up across countries
and lead to faster rates of economic growth in the importing countries,
which would imply some form of convergence. However, this process of
convergence is conditional in the sense that the growth rate depends, for a

Fatma MRAD
given initial technology gap, on national policies and other variables that
influence the growth rate of the importing country. To test the hypothesis
of convergence, the majority of empirical studies introduce a measure of the
initial situation in their growth regressions. Some study the link between
GDP per capita growth rate and the logarithm of initial per capita GDP
(Romer, 1993; Mankiw et al., 1992; Barro, 1991). However, Edwards (1998)
explained the growth rate of TFP based on a log of initial per capita GDP.
In the various cases, a negative relationship between the growth rate and
the initial situation allows the convergence for the considered sample of
countries to be highlighted.
Moreover, the catching-up process of the developed countries’ techno-
logical level is achieved as the developing country adopts foreign technol-
ogy and is dependent on a high absorption capacity. Most economists (Ben
Habib, Spiegel, 1994; Grossman, Helpman, 1991; Nelson, Phelps, 1966) see
in human capital the main factor that determines not only the ability of a
country to innovate, but also to assimilate foreign technology and catch
up the technological level of developed countries. Specifically, they assume
that there is a link between the level of education of a country and its capac-
ity to absorb foreign technology. To test these arguments and the hypothesis
of convergence, we include human capital and initial technological level as
determinants of TFP growth rate.

Lastly, we also include IPRs protection as an explanatory variable in the
first equation in order to examine if it has a direct effect on TFP growth
rate. Relying on existing studies, IPRs protection motivates innovation and
encourages research, it thereby increases economic growth (Falvey, Foster,
2006; Park, Ginarte, 1997; Gould, Gruben, 1996).
In the literature, the indicators of IPRs protection are two in number:
the Rapp and Rozek indicator (1990), and that of Park and Ginarte (1997).
In this work, we will use this last indicator, which is most used in the recent
literature for empirical research. It covers a relatively larger number of coun-
tries and a longer period of time. This indicator is constructed by Park and
Ginarte (1997) and it is updated by Park (2008). The indicator on IPRs
protection ranges from zero (no patent system) to five (strongest level of
protection). The value of the index is obtained by aggregating the follow-
ing five components: extent of coverage, duration of protection, absence of
restrictions on rights, membership of international treaties, and statutory
enforcement provisions.2
2. For more details on the criteria and measurement of the indicator on IPRs protection, see
Park and Lippoldt (2014). Coverage refers to the subject material (type of invention) that can be
protected; duration refers to the length of protection; restrictions refer to the less than exclusive

Thus, equation 1 examines the determinants of the growth rate of TFP.

The explanatory variables are the initial technological level, human capital,
the import of capital goods, the degree of openness (openness rate) and IPRs
protection. Table 1 summarizes all these variables.
The first equation is written as follows:

TFP
( ) it = b0 + b1In( y 0 ) it + b2In(HK ) it + b3In( Mtech ) it
TFP
M +X (equation n° 1)
+ b4  + + b5In(IPR ) it + e it
 Y  it
where i refers to a country and t to the time period. ε is an error term.
The expected signs of the coefficients: β1<0, β2> 0, β3> 0 and β4> 0. The
sign of the estimated coefficient of In(IPR); β5 is to be determined.
The Relationship between IPRs Protection

and Technology Transfer through the Importation
of Capital Goods: Equation 2
In equation 2, it is assumed that technology transfer through the importa-
tion of capital goods is the endogenous variable. We include IPRs protection
as an explanatory variable.

Some empirical studies, such as those of Ivus (2010), Awokuse and Yin
(2010), Smith (1999), explained trade in goods by IPRs protection regimes
in the importing countries. For example, Ivus (2010) explained the northern
countries’ exports (24 OECD countries) to developing countries (55 devel-
oping countries) through the southern IPRs policy. The author distinguished
between exports of sensitive industries by patent protection, and those
of insensitive industries by patent protection. Awokuse and Yin (2010)
explained the imports of Chinese technology intensive sectors (chemistry,
electronics, instruments and machines) by the IPRs policy. Smith (1999)
explained the bilateral exports of the United States economy by the regimes
of IPRs protection, the tariff policy of the importing country, as well as other
use of those rights; membership of international treaties indicates the adoption into national law
of certain substantive and procedural laws of those international agreements. Membership of
an international treaty may also signal the willingness of particular nations to adhere to shared
international principles such as non-discrimination. The enforcement component consists of
mechanisms that assist in enforcing one’s patent rights (such as preliminary injunctions against
infringers). Each of these components is scored on a scale from 0 to 1 (reflecting the fraction of
legal features that are available). The overall value of the patent rights index is the unweighted
sum of the component scores

42
Table 1 – Definition of equation n° 1
and data information
Variable Definition Source
Dependent Variable
Fatma MRAD
– To calculate the average annual growth rate of TFP, we

relied on the work of Bernanke and Gürkaynak (2001).

TFP the average annual growth rate of TFP in a developing country
: growth rate of – Database Alan Heston, Robert Summers and Bettina
TFP calculated over periods 1970-74,1975-79, 1980-1984,1985-89,
Aten, Penn World Table Version 7.1, Center for
TFP 1990-1994, 1995-1999, 2000- 2004 and 2005-2009
International Comparisons of Production, Income and
Prices at the University of Pennsylvania, July 2012
Explanatory Variables
Database Alan Heston, Robert Summers and Bettina Aten,
the logarithm of initial per capita GDP of a developing country
In(y0) : initial Penn World Table Version 7.1, Center for International
calculated for the initial year of each period, i.e. for 1970, 1975,
technological level Comparisons of Production, Income and Prices at the
1980, 1985, 1990, 1995, 2000 and 2005
University of Pennsylvania, July 2012
Three different measures of human capital are adopted: In(atys),
In(HK) : human capital
In(ayss) and In(ayts)
the logarithm of the average years of total schooling (for the
population aged over 15 years) calculated for the initial year of each
In(atys)
period, i.e. for 1970, 1975.1980, 1985, 1990, 1995, 2000 and
2005 Basic data of Barro, R. and Lee, J. W., A New Data Set of
Educational Attainment in the World, 1950-2010.
the logarithm of the average years of secondary schooling (for the Website: http://www.barrolee.com/
population aged over 15 years) calculated for the initial year of each For more detail about data set of educational attainment,
In(ayss)
period, i.e. for 1970, 1975.1980, 1985, 1990, 1995, 2000 and see Barro and Lee (2013)
2005
the logarithm of the average years of tertiary schooling (for the
population aged over 15 years) calculated for the initial year of each
In(ayts)
period, i.e. for 1970, 1975, 1980, 1985, 1990, 1995, 2000
and 2005
Journal of Innovation Economics & Management – 2017/2 – n° 23

We use the share of imports Machinery and transport

equipment (class 7, SITC, Standard Classification for
International Trade) in GDP. The data source is different
numbers of UNCTAD Handbook of Statistics, the United
the logarithm of the average of the share of imports of capital
Nations Conference on Trade and Development (UN)
In(Mtech) : import of goods in GDP. The average is calculated for each of the periods
UNCTAD Handbook of Statistics. Imports are expressed in
high technology goods 1970-1974, 1975-1979, 1980-1984, 1985-1989, 1990-1994,
US dollars (current).
1995-1999, 2000-2004 and 2005-2009
– The data source of the GDP variable; expressed
in US dollars (current) is the Data Base of the
World Bank (2012), website: http://data.worldbank.org/
indicator.
– Database Alan Heston, Robert Summers
the average annual growth rate of the openness rate calculated
and Bettina Aten, Penn World Table Version 7.1,
for the periods 1970-1974, 1975-1979, 1980-1984,
Center for International Comparisons of Production,
M+X 1985-1989, 1990-1994, 1995-1999, 2000-2004 and from
[ ]: openness rate Income and Prices at the University of Pennsylvania, July
Y 2005 to 2009
2012
the logarithm of the IPRs protection index of Park and Ginarte and – Data Base Park et Ginarte (1997) and Park (2008).
In(IPR) : IPRs protection defined for the initial year of each five-year period, i.e. for 1970, (The author thinks Walter Park for providing database on
1975,1980, 1985 1990, 1995,2000 and 2005 the IPR index)
n° 23 – Journal of Innovation Economics & Management – 2017/2

43
Fatma MRAD
explanatory variables (per capita income, population, the distance between

partner countries).
As presented above, a strengthening of IPRs protection has two con-
tradictory effects on trade flows. They are a ‘market expansion’effect and a
‘market power’ effect (Smith, 2001). The results of our empirical analysis will
suggest which effect dominates the other for the sample of countries.
Similarly, in Equation 2, it is assumed that technology transfer via the
import of capital goods depends on the degree of openness of the country, in
addition to IPRs protection. A growing openness to international trade pro-
motes the number of foreign varieties of capital goods in an economy which
promotes technology transfer. Among the openness measures defined in the
literature are indicators related to trade policies. The index of freedom to
trade internationally is used in this work as a determinant of technology
transfer through the import of capital goods. This index of freedom to trade
internationally varies on a scale from one to ten. It is an aggregating measure
of restraints that affect international exchange: (i) taxes on international
trade,(ii) regulatory trade barriers, (iii) black market exchange rates, and
(iv) controls of the movement of capital and people.3
On the other hand, there are some threshold levels of development
below which a country may not be able to adopt new technologies (Nelson,
Phelps, 1966). So we predict that the higher the technology level of the

host country, the higher the import of high-tech goods will be. In our analy-
sis, the technology level of a country is measured by the ratio of per capita
income relative to that of the United States, and is included as an explana-
tory variable in the technology transfer equation. We test the impact of the
technology level of a country on the volume of inflows of foreign technology.
The choice of the United States is largely owing to its position in the
global economy. In many studies, it is taken to be the leading country, i.e.
the economic dominant country. Moreover, this country was the largest
global exporter of capital and equipment goods for many years (Thorbecke,
2012).
Finally, it is assumed that a country’s membership of the WTO boosts its
imports of foreign technologies embodied in capital goods since, by signing
the TRIPS Agreement, the country agrees to strengthen IPRs protection.
3. Freedom of international trade of a country is considered significant if it has low tariffs and
quotas, few controls on the exchange rate (having a freely convertible currency), and poor
control on the movement of capital and people. Source: Economic Freedom of the World, 2012
Annual Report, Chapter 1, Economic Freedom of the World in 2010.website: www.freetheworld.
com.

Table 2 describes the evolution of the growth rate of the IPRs indicator
of Park and Ginarte (calculated on average) over the 1960-2005 period
for all developed countries and the sample of developing countries. The
sample of developed countries includes the following countries: Australia,
Austria, Belgium, Canada, Denmark, Spain, USA, Finland, France,
Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Malta, Norway, New
Zealand, the Netherlands, Portugal, the United Kingdom, Sweden and
Switzerland.
Table 2 – Evolution of growth rates of IPRs protection indicator (in percent)
period 1960- 1965- 1970- 1975- 1980- 1985- 1990- 1995- 2000-
country 1965 1970 1975 1980 1985 1990 1995 2000 2005
Developed
4.59 4.88 0.65 16.15 5.13 8.05 25.52 9.84 1.56
countries
Developing
1.17 1.75 1.61 6.17 2.46 3.03 45.27 32.80 16.12
countries
Developing
countries that
have signed the 1.24 1.65 0.92 6.71 2.56 3.19 49.25 29.84 15.72
agreement in
1995
Developing
countries that
have signed the 0 3.63 0 3.96 2.66 2.94 16.79 33.93 18.73

agreement in
1996
Jordan* 0 0 36.92 0 0 0 44.94 182.17 13.18
Nepal** – 0 0 0 0 0 0 0 22.40
Notes: * Jordan has signed the TRIPS Agreement April 11, 2000.
** Nepal signed the TRIPS Agreement April 23, 2004.
Source: Author’s calculations
The first conclusion that emerges from this table is that during the period
1975-1990, the growth rate of the IPRs indicator (calculated average) in our
sample of developing countries is lower than those achieved in developed
countries. Conversely, the situation was reversed during the period 1990-
2005. The growth rates of IPRs indicator became relatively higher in devel-
oping countries.
This phenomenon can be explained by the fact that most developed
countries started the establishment of a system of IPRs protection relatively
earlier. However, developing countries have accelerated the growth of IPRs
protection and have implemented reforms in this area after 1990 in order to
gain access to the WTO.

Fatma MRAD
Table 2 shows that developing countries who were signatories to the

TRIPS Agreement in 1995 registered the highest growth rate of IPRs pro-
tection during 1990-1995. However, since developing countries signed the
agreement in 1996, the highest growth rate of IPRs protection was recorded
during the period 1995-2000. Similarly, Jordan signed the TRIPS Agreement
in 2000 and greatly strengthened IPRs protection between 1995 and 2000.
In addition, Nepal registered a not-null growth rate of IPRs protection only
during the period 2000-2005. The country signed the agreement in 2004.
It appears that strengthening the protection of IPRs characterized the
period in which the TRIPS Agreement was signed by countries in the sample.
We then create a dummy variable referred to as TRIPS regarding the
period during which the TRIPS Agreement was signed by a sample of coun-
tries. The value of 1 is assigned to the period in which the TRIPS Agreement
was signed by the country. The value zero is allocated to other periods. We
include this dummy variable as our final determinant of technology transfer.
To summarize, equation 2 examines the determinants of the import of
high-tech goods. The explanatory variables are IPRs protection, the degree
of openness of the country, its technological level, and the TRIPS variable.
Table 3 summarizes these variables.
Table 3 – Definition of equation n°2 and data information


Variable Definition Source
Dependent Variable
In(Mtech) : import of
This is the same variable defined in equation 1 and table 1
high technology goods
Explanatory Variables
In(IPR) : IPRs protection This is the same variable defined in equation 1 and table 1.
The logarithm of the indicator
Data Base James Gwartney,
“Freedom to Trade Internationally”. It is
Robert Lawson, and Joshua
set for the initial year of the following
Hall, Fraser Institute, year:
In(ftrade) : Freedom to periods: 1970-74, 1975-79, 1980-
2012
Trade Internationally 84, 1985-1989, 1990-1994 and
URL: http://www.
1995-1999. For the 2000-2004 and
freetheworld.com/datasets_
2005-2009 periods, the average of
efw.html
this indicator is calculated
Database Alan Heston,
Robert Summers and Bettina
The logarithm of the ratio of GDP per Aten, Penn World Table
y0 capita of a country relative to that of Version 7.1, Center for
In
y0USA : technological the US economy. It is set for the initial International Comparisons
year of each period, i.e. for 1970, of Production, Income and
level 1975, 1980, 1985, 1990, 1995, Prices at the University of
2000 and 2005. Pennsylvania, July 2012
URL: http://pwt.econ.
upenn.edu/.

World Trade Organization -

A dummy variable regards the period Agreement on Trade-Related
during which the TRIPS Agreement Aspects of Intellectual
was signed by a country. The value of Property Rights-Contracting
TRIPS : TRIPS
1 is assigned to the period in which Parties/Signatories
Agreement
the TRIPS Agreement was signed by (URL: http://www.wipo.
the country. The value zero is allocated int/wipolex/en/other_
to other periods. treaties/parties.jsp?treaty_
id=231&group_id=22)
The second equation can be written as follows:
In( Mtech ) it = d 0 + d1In(IPR ) it + d 2In( ftrade) it + d 3TRIPSit

y (equation n° 2)
+ d 4In( 0 ) it + e it'
y0USA
i denotes a country. t denotes the time. ε’ is an error term.

The expected sign of δ1 coefficient is to be determined. The expected
signs of δ2, δ3 and δ4 coefficients are positive.
The expected sign of δ1 coefficient is to be determined because, as was
discussed above, the impact of strengthening IPRs protection on trade flows
depends on two contradictory effects; ‘market expansion’ or ‘market power’

effects. The first effect is positive, while the second effect is negative. The
total effect is then to be determined. If the sign of δ1 is positive and signifi-
cant, the ‘market expansion’ effect outweighs the ‘market power’ effect. IPRs
protection is likely to encourage imports of capital goods.
Therefore, the simultaneous equations model is written as follows:

 TFP M +X
( TFP ) = b0 + b1In( y0 ) it + b2In(HK ) it + b3In( Mtech ) it + b4  Y 
 it (E1)
 + + b5In(IPR ) it + e it

In( Mtech ) it = d 0 + d1In(IPR ) it + d 2In( ftrade) it + d 3TRIPSit
 y (E2)
 + d 4In( 0 ) it + eit'
 y0USA

TFP
The variables , In(y0), In(HK), In(Mtech), (M+X/Y), In(IPR),
TFP
In(ftrade), TRIPS and In(y0/y0USA) have the same definitions as in equations
n° 1 and n° 2, (Tables 1 and 3).

Fatma MRAD
The correlation between the dependent and independent variables

in equations 1 and 2 is presented in Table 4. The correlation coefficients
between explanatory variables of each equation are low. However, the three
measures of human capital adopted in our study are highly correlated with
each other.
Table 4 – Correlation between variables
Correlation Matrix : Equation n° 1

TFP TFP In (y0) In(ayts) In(ayss) In(ayts) In (Mtech) (M+X)/Y In (IPR)

TFP TFP 1
In (y0) 0.0788 1
In (atys) 0.1825* 0.6891* 1
In(ayss) 0.2238* 0.6727* 0.8922* 1
In (ayts) 0.1159* 0.6865* 0.7702* 0.8322* 1
In(Mtech) 0.1463* 0.3528* 0.3375* 0.2854* 0.1732* 1
(M+X)/Y 0.0557 0.0616 0.0686 0.0411 0.1212* -0.0485 1
In(IPR) 0.1261* 0.2296* 0.4235* 0.3938* 0.2769* 0.2307* -0.0526 1
Correlation Matrix : Equation n° 2
In(Mtech) In(IPR) In(ftrade) TRIPS In(y0/y0usa)

In(Mtech) 1

In (IPR) 0.2307* 1
In(ftrade) 0.4111* 0.3368* 1
TRIPS 0.1017* 0.1441* 0.1794* 1
In(y0/y0usa) 0.3056* 0.0765 0.2505* -0.0199 1
* indicates significant at the 0.05 level
The import of capital goods, which is an explanatory variable in the first

equation, is itself the dependent (endogenous) variable associated with the
second equation in the full system.
An important step before estimating the model is to focus on the endoge-
neity of this variable (MTech). The last row in Table 5 displays the p value
of Durbin-Wu-Hausman tests. The evidence points to the exogeneity of the
MTech variable.
Because the dependent variables are correlated and IPRs protection is a
common predictor for both equations, there may be a ‘contemporaneous’ cor-
relation among the errors across the two equations. Table 5 shows that the

p value of Breusch-Pagan tests of independence rejects the hypothesis that

the correlation of the residuals across equations is zero.
Since both are over-identified equations, the model will be over-identi-
fied. The Seemingly Unrelated Regressions (SUR) method is applied. Note
that the software STATA 11.0 is used. The SUR method allows us to test
multi-equation models, while taking into account the fact that the equations
are not independent. If we estimate the model equation-by-equation using
standard ordinary least squares (OLS), we will obtain consistent estimates,
although generally not as efficiently as the SUR method. The latter allows
us to obtain estimates for each equation, adjusted for the non-independence
of the equations. Yet the individual equations cannot be considered sepa-
rately because the independence assumption, as stated by economics, is not
fulfilled. It is well known from the literature that economic growth factors
are correlated.
The empirical analysis uses a panel data set consisting of eight separate
5-year periods, 1970-74, 1975-79; 1980-1984, 1985-89; 1990-94, 1995-99;
2000-2004 and 2005-2009, for 48 developing countries. For these countries
of our sample, the available data contain some missing values over the whole
period 1970-2009.
We have estimated the model by iterative, seemingly unrelated regres-
sion (ITSUR). According to this method, the estimation is run iteratively

until convergence is achieved. We have also estimated the model by OLS.
As indicated above, the OLS estimates are obtained while ignoring any cor-
relation between the error terms of different equations. We do not show
them here. Our results showed that the SUR estimator performed better in
investigating the impacts of IPRs protection than the OLS estimator.
Table 5 shows the results of estimation of the simultaneous equations
model. As noted in Table 1, three different measures of human capital are
adopted: the average years of total schooling (In(atys)), the average years of
secondary schooling (In(ayss)), and the average years of tertiary schooling
(In(ayts)).
The first three columns of Table 5 present estimates for the base model-
specified above. In columns (4) to (6) of this table, we exclude the variable
In(ftrade); ‘Freedom to Trade Internationally’; from the second equation of
the system. The tests of independence of the residuals of the two equa-
tions obtained from estimating the model by ITSUR are also shown in
Table 5.

Fatma MRAD
Table 5 – Estimate of simultaneous equations model:

Seemingly Unrelated Regression
Base model Excluding the variable In(ftrade)
(1) (2) (3) (4) (5) (6)

Explanatory Equation 1: Dependent variable growth rate of total factor productivity
variables (1970-2009)
-0.0055*** -0.0076*** -0.0039* -0.0024 -0.0076*** -0.0008
In (y0)
(0.0022) (0.0022) (0.0022) (0.0021) (0.0020) (0.0021)
0.0069 0.0096**
In(atys) - - - -
(0.0043) (0.0039)
0.0086*** 0.0104***
In(ayss) - - - -
(0.0028) (0.0024)
In(ayts) 0.0010 0.0026
- - - -
(0.0018) (0.0017)
0.0147*** 0.0157*** 0.0146*** 0.0010 0.0157*** 0.0001
In(Mtech)
(0.0022) (0.0022) (0.0022) (0.0022) (0.0021) (0.0022)
M+X 0.0475 0.0457 0.0513 0.0252 0.0271 0.0239
[ ]
Y (0.0333) (0.0329) (0.0335) (0.0311) (0.0306) (0.0315)
0.0006 -0.0013 0.0029 0.0036 -0.0016 0.0065*
In(IPR)
(0.0039) (0.0038) (0.0036) (0.0037) (0.0037) (0.0035)
0.0791*** 0.1096*** 0.0782*** 0.0106 0.1096*** 0.0149*
Constant
(0.0175) (0.0204) (0.0241) (0.0170) (0.0193) (0.0231)
Explanatory
Equation 2: Dependent variable the share of imports of capital goods in GDP (In)
variables
In (IPR) 0.1516* 0.1530* 0.1510* 0.3229*** 0.3268*** 0.3227***

(0.0814) (0.0813) (0.0814) (0.0799) (0.0798) (0.0799)
0.3702*** 0.3683*** 0.3709***
In(ftrade) - - -
(0.0588) (0.0585) (0.0590)
0.0269 0.0204 0.0305 0.1820* 0.1413 0.1835*
TRIPS
(0.1007) (0.1002) (0.1011) (0.1065) (0.1032) (0.1060)
y0 0.1619*** 0.1635*** 0.1612*** 0.2233*** 0.2258*** 0.2232***

In
y0USA (0.0364) (0.0364) (0.0364) (0.0362) (0.0362) (0.0362)
-2.9864*** -2.9798*** -2.9890*** -2.4243*** -2.4158*** -2.4247***

Constant
(0.1366) (0.1362) (0.1368) (0.1047) (0.1047) (0.1047)
observations 343 343 343 365 365 365
Breusch-
Pagan test of
independence 22.189*** 25.416*** 19.908*** 2.215 24.808*** 5.344**
of the Pr = 0.0000 Pr = 0.0000 Pr = 0.0000 Pr = 0.1366 Pr = 0.0000 Pr =0.0208
residuals:
chi2(1)
Tests of
endogeneity:
Durbin 2.67047 2.57993 1.25901
(score)chi2(1) pr=0.1022 pr=0.1082 pr=0.2618
Wu-Hausman 2.6365 2.54643 1.23786
F(1,336) pr = 0.1054 pr = 0.1115 pr = 0.2667
Notes: Standard errors are in parentheses

**, ** And * respectively represent the significance at the 1%, 5% and 10%

COMMENTS AND TEACHINGS

According to the first two columns in Table 5, the coefficients of the vari-
able ‘share of imports of capital goods in GDP’ are positive and statistically sig-
nificant at the 1% level. Our results reflect the positive effect of technology
transfer through international trade on the TFP growth rate of developing
countries.
It appears from the estimation of TFP growth equation that the three
measures of human capital do not have the same effect. Human capital,
measured by the average years of secondary schooling, has a positive and sta-
tistically significant effect on the TFP growth rate (column 2), while there
is no such effect when it is measured by the average years of total schooling
(column 1) or by the average years of tertiary schooling (column 3).
According to column (2), the coefficient of the variable “logarithm of
initial per capita GDP” is negative and statistically significant at the 1%
level. Our results corroborate the convergence hypothesis. Thanks to the
import of high-technology goods and human capital investment policy,
developing countries may grow faster than developed countries, and there-
fore tend to catch up.
The results for the TFP growth equation presented in the first three col-
umns show that the variable ‘share of imports and exports in GDP’ has a posi-

tive sign, but it is not a significant variable. So we do not find evidence for
an effect of the openness rate on the TFP growth rate.
In columns (1) through (3), the results for the variable In (IPR) appear
insignificant in the regressions of TFP growth equation, but show positive
and significant coefficients in the regressions of the import of capital goods
equation. This is the ‘market expansion’ effect that dominates the ‘market
power’ effect for our sample of developing countries. So the attractive-
ness of a developing country for foreign technology depends on its IPRs
policy.
The results for the import of capital goods equation presented in the first
three columns of Table 5 also indicate that the coefficients of the variable
‘Freedom to Trade Internationally’ are positive and significant at the 1% level.
As expected, technology transfer via the import of capital goods depends on
the degree of openness of the country.
Furthermore, the estimation results for the import of capital goods equa-
tion given in the first three columns show that the technology level of a
country positively and significantly affects the import of capital goods.
The coefficients of the variable ‘ratio of per capita income relative to that of
the United States’ are positive and statistically significant at the 1% level.

Fatma MRAD
From these results, we also see that, although the coefficients are not sig-
nificant, the variable ‘TRIPS’ has a positive effect on the capital goods
imports.
As described above, columns (4) through (6) summarize the estimation
results of the simultaneous equations model when the variable In(ftrade);
‘Freedom to Trade Internationally’ is excluded from the second equation of the
system.
The estimation results for the TFP growth equation when the variable is
excluded are very similar to those of the basic model (columns (1) through
(3)). According to the fifth column, the import of capital goods and human
capital, measured by the average years of secondary schooling, has positive
and statistically significant effects on the TFP growth rate.
The results for the import of capital goods equation show that the vari-
able In (IPR) exhibits positive and strongly significant coefficients in regres-
sions (4) through (6).
While the results do not change for the variable technology level, the
regression in column (6) indicates that the variable TRIPS has a positive
and significant effect on the share of capital goods imports in GDP. It indi-
cates that the coefficient of this variable is positive and statistically signifi-
cant at the 10% level.
Overall, these estimates show a positive and statistically significant effect

of the import of capital goods on the TFP growth rate, and a positive and sta-
tistically significant effect of IPRs protection on the import of capital goods.
However, they show a positive but statistically insignificant effect of IPRs
protection on the TFP growth rate. Thus, IPRs protection has a positive
impact on TFP growth rate by attracting foreign technologies incorporated
in products.
The result of a stimulating effect of technology transfer through the
importation of capital goods on the TFP growth rate is inconsistent with the
findings of some earlier works. In fact, Blomström et al. (1992) found no sig-
nificant effect of the share of imports of machinery and transport equipment
(GDP) on the per capita GDP growth rate of developing countries. On the
contrary, this result is confirmed by some empirical studies that have shown
the beneficial effects of technology transfer related to international trade for
developing countries (Connolly, 2003; Coe et al., 1997).
The empirical results clearly suggest that a developing country could
benefit from imported technologies incorporated in capital goods, as well as
a human capital investment policy. Under these conditions, and in accord-
ance with theoretical predictions, the convergence hypothesis is verified.
If human capital increases, developing countries will have the ability to

assimilate foreign technology and catch up with the technological level of

developed countries.
The estimation results concerning the challenging role of human capital
measured by the average years of secondary schooling confirm the theoreti-
cal predictions and are in line with the results of some empirical studies that
tested the effect of human capital in the presence of technology transfer
related to international trade (Coe et al., 1997; Blomström et al., 1992), and
the empirical studies that tested the effect of human capital in the presence
of the IPRs protection policy (Park, Ginarte, 1997; Gould, Gruben, 1996;
Thompson, Rushing, 1996). Yet this result contradicts the study of Falvey
and Foster (2006). These authors found a non-significant effect of human
capital on the growth rate of per capita GDP.
Contrary to most studies’ findings, the results indicate that the variable
openness rate has no significant effect on the TFP growth rate in a devel-
oping country. Note that Harrison (1996), using the openness rate among
others as a determinant of the economic growth of a country, shows that the
significance of this variable depends on the econometric estimation method
(annual data, average data per period).
The inclusion of this variable openness rate as a determinant of TFP
growth rate has altered neither the sign nor the significance of the variable
import of capital goods. One possible explanation for this result is a non-

significant effect on the degree of openness and a stimulating effect of the
import of capital goods. The latter effect is not simply reflecting the effect of
the trade openness policy of an economy, but rather the effect of the transfer
of technology embodied in goods. Moreover, it is the access to high technol-
ogy goods that is more important for the growth of developing countries in
comparison to market access by exploiting economies of scale.
Estimates show that IPRs protection is favorable to increased flows of
foreign technologies embodied in capital goods in the case of developing
countries. They also show the existence of a positive and significant effect
of ‘Freedom to Trade Internationally’ on technology transfer through inter-
national trade. Our results are in line with the study of Park and Lippoldt
(2014).
The result of a stimulating effect of IPRs protection policy on the impor-
tation of capital goods is confirmed by the results of empirical studies that
tested the relationship between international trade in goods and the IPRs
protection policy of developing countries (Awokuse, Yin, 2010; Ivus, 2010;
Maskus, Penubarti, 1995).
The result of a positive and significant effect of IPRs protection on the
share of imports of high technology goods is inconsistent with that of Fink

Fatma MRAD
and Primo Braga (1999). These authors found a negative and insignificant
relationship between IPRs protection and the international trade in high
technology goods (machinery and electrical facilities, telecommunications
equipment).
When the IPRs protection policy of developing countries is effective,
the entry of foreign goods is important. This result implies that this policy is
likely to increase the ‘market expansion’ effect. Therefore, technology trans-
fer to the importing country is stimulated. This confirms the statement of
Rapp and Rozek (1990): “Intellectual protection helps countries attract technol-
ogy and disseminate it in the economy” (Rapp, Rozek, 1990, p. 81).
The estimation results also show a positive and statistically significant
effect of the variable ‘TRIPS’, implying that imports of capital goods by
developing countries may be stimulated by changing the laws for IPRs pro-
tection to comply with the provisions of the WTO TRIPS Agreement.
This result is confirmed by the work of Ivus (2010). The author has
shown that strengthening IPRs protection in developing countries during
the period ‘after TRIPS Agreement’; 1994-2000, has increased the value
of exports from developed countries to developing ones. This increase in
export value was due to the increase in the quantities rather than prices.
To sum up, the results of the empirical work demonstrate the existence
of a significant positive relationship between technology transfer through

international trade and the TFP growth rate, on the one hand, and between
IPRs protection and technology transfer through trade, on the other hand.
CONCLUSION
The purpose of this work is to show that technology transfer via interna-
tional trade and IPRs protection are important determinants of economic
growth in developing countries.
We tried to test the relationship between IPRs protection, technology
transfer via international trade, and economic growth empirically. Specifically,
a simultaneous equations model for 48 developing countries over the period
1970-2009 was estimated. This is a two-equation model where the first equa-
tion explains the growth rate of TFP with the protection of IPRs, and tech-
nology transfer via capital goods imports, and the second equation represents
the relationship between the technology transfer via capital goods imports,
and IPRs protection. The two equations are estimated simultaneously.
Three results have emerged from the empirical analysis. The first result
relates to the positive and significant effect of capital goods imports on the

TFP growth of developing countries. One explanation for this result is that
these imported goods incorporate foreign technology. The second outcome
is the existence of a positive and significant relationship between IPRs pro-
tection and technology transfer via trade in capital goods. Finally, this work
shows that there is an indirect relationship between IPRs protection and
the growth of TFP. Strengthening IPRs protection encourages exports of
high technology goods from developed countries to developing ones. The
latter will benefit from foreign technology. Therefore, the TFP growth rate
is stimulated. Moreover, the empirical results support expectations of the
WTO under the TRIPS Agreement. According to these expectations, IPRs
protection is a factor which encourages technology transfer via the liberali-
zation of international trade.
Throughout this work, the focus was on the effect of IPRs protection on
technology transfer through international trade. It would have been desir-
able to also test the effect of IPRs protection on technology transfer via FDI.
The results of this analysis would better judge the argument put forward by
the WTO that the protection and enforcement of IPRs should contribute to
the transfer of technology to the South.
More empirical research is needed to gain more insight regarding the
linkages between economic growth, IPRs protection and technology trans-
fer. The challenge of such research will be to identify methods of estimation
in order to exploit the panel of cross-country analyses data, like the present

study. Such methods would estimate a SUR model using fixed effect estima-
tors in the context of panel data.
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The effects of intellectual property rights protection in the

technology transfer context on economic growth: the case

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Recently, there has been an awareness of the importance of intellectual

n° 23 – Journal of Innovation Economics & Management – 2017/2 33

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34 Journal of Innovation Economics & Management – 2017/2 – n° 23

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n° 23 – Journal of Innovation Economics & Management – 2017/2 35

PROTECTION OF INTELLECTUAL PROPERTY

Technology Transfer and Protection of Intellectual

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36 Journal of Innovation Economics & Management – 2017/2 – n° 23

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Protection of Intellectual Property Rights

n° 23 – Journal of Innovation Economics & Management – 2017/2 37

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38 Journal of Innovation Economics & Management – 2017/2 – n° 23

Property Organization Convention, and contracting parties of the Paris

The Links between Technology Transfer through

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n° 23 – Journal of Innovation Economics & Management – 2017/2 39

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40 Journal of Innovation Economics & Management – 2017/2 – n° 23

Thus, equation 1 examines the determinants of the growth rate of TFP.

The Relationship between IPRs Protection

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n° 23 – Journal of Innovation Economics & Management – 2017/2 41

Variable Definition Source

– To calculate the average annual growth rate of TFP, we

Journal of Innovation Economics & Management – 2017/2 – n° 23

We use the share of imports Machinery and transport

n° 23 – Journal of Innovation Economics & Management – 2017/2

explanatory variables (per capita income, population, the distance between

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44 Journal of Innovation Economics & Management – 2017/2 – n° 23

Table 2 – Evolution of growth rates of IPRs protection indicator (in percent)

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n° 23 – Journal of Innovation Economics & Management – 2017/2 45

Table 2 shows that developing countries who were signatories to the

Table 3 – Definition of equation n°2 and data information

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46 Journal of Innovation Economics & Management – 2017/2 – n° 23

World Trade Organization -

The second equation can be written as follows:

In( Mtech ) it = d 0 + d1In(IPR ) it + d 2In( ftrade) it + d 3TRIPSit

i denotes a country. t denotes the time. ε’ is an error term.

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n° 23 – Journal of Innovation Economics & Management – 2017/2 47

The correlation between the dependent and independent variables

Table 4 – Correlation between variables

Correlation Matrix : Equation n° 1

In(Mtech) In(IPR) In(ftrade) TRIPS In(y0/y0usa)

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The import of capital goods, which is an explanatory variable in the first

48 Journal of Innovation Economics & Management – 2017/2 – n° 23

p value of Breusch-Pagan tests of independence rejects the hypothesis that

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n° 23 – Journal of Innovation Economics & Management – 2017/2 49

Table 5 – Estimate of simultaneous equations model:

y0 0.1619* 0.1635* 0.1612* 0.2233* 0.2258* 0.2232*

-2.9864* -2.9798* -2.9890* -2.4243* -2.4158* -2.4247*