Intellectual property rights and the efficiency of international production networks: evidence from the automotive industry

This study investigates the potential benefits of intellectual property rights (IPR) institutions for international production networks. Using unique data on manufacturer-supplier linkages in the automotive industry, we establish a positive empirical relationship between the efficiency of vehicle producers and IPR protection in their suppliers’ locations. Notably, IPR do not have the same impact on ownership networks as knowledge is internalized within the boundaries of the firm. We confirm that the results are not driven by other firm- or country-level characteristics, and address potential endogeneity concerns by employing a novel gravity-based IV approach using geographical distance and language proximity.