Expanding into countries like China is high on the agenda for many multinationals, but long-standing concerns exist over the robustness of IP protection when they do so. Indeed, for many, losing control of their IP is a consequence of investing in those countries.
New research from the University of Notre Dame suggests a number of ways for companies to protect their IP, even when investing in countries with weak IP protection laws.
The researchers examined the innovation work of 143 global pharma companies, who were operating in over 100 countries around the world, in 18 distinct geographic regions. The team were specifically looking for the geographic entry pattern of each companies’ upstream R&D and the subsequent downstream commercialization activities.
Keeping it local
The research found that when the commercialization activities were in the same region as the R&D activity can help to protect the intellectual property generated through the research. What’s more, this can even occur in regions with poor IP protection.
“Previous studies have shown that firms need both upstream and downstream activities to profit from their innovations, but the question remains about ‘where’ this can happen,” the authors say. “We show that the regional level can be an answer. For example, all upstream and downstream activities don’t have to take place in one country; they can take place across the region.”
This strategy can be especially effective if the company takes a truly regional approach and spreads their activities across the region. This not only makes it harder for rivals to fully understand all of the work the company is doing, but even if they do copy it, it will take too long to capture the value from it as they would also need to develop the commercialization activities to capitalize on the IP.
The research is fascinating as there is a growing desire not only to tap into the talent that exists around the world, but also the increasingly lucrative markets. Both of those things have tended to evolve at a quicker rate than the legal frameworks that exist however, resulting in many companies playing Russian roulette with their IP. The researchers believe that their findings could substantially improve the R&D possibilities for pharma firms around the world by giving them confidence to enter markets they might previously have avoided.
“For example, countries with rainforests allow for unique opportunities to research tropical diseases and develop new drugs,” they explain. “But the question remains: should firms locate research and development activities in countries with poor intellectual property rights? Our research indicates that having downstream activities that can help protect intellectual property, paving the way for them to invest in these countries.”