Intellectual Property Rights and Foreign Investment: The Political Economy of Taiwan's Technology-Intensive Foreign Direct Investment

This article employs Taiwan's institutions for intellectual property rights (IPR) to explain two aspects of Taiwan's foreign direct investment behavior: the location of offshore sites for Taiwanese research and development, and investment by Taiwanese venture capitalists. The article first describes the evolution of Taiwan's informal IPR practices that differ from the ideal typical IPR regime supposedly required for economies as technologically sophisticated as Taiwan's. Essentially, Taiwan has developed informal practices to protect corporate IPR that are centered on internal corporate mechanisms rather than external formal legal mechanisms. Relying on these informal practices, the article discusses how Taiwan has invested in technology-intensive activities in locations where IPR protection is weak. This behavior stands in sharp contrast to the behavior of multinationals from the Organisation for Economic Co-operation and Development countries.