Intellectual property rights, diasporas, and domestic innovation

This paper studies the interaction between international migration and intellectual property rights (IPR) in determining innovation performance of developing countries. Although emigration may directly cause brain drain, it generates a flow of knowledge acquired by emigrants abroad back to their home countries, which could be exploited under sound IPR institutions. IPRs can thus stimulate domestic innovation by creating the right environment to absorb potential gains from international migration. Using a panel dataset of emerging and developing countries, we show that migration has a favorable effect on strengthening the link between IPR protection and innovation by making a new source of knowledge available to domestic innovators. We test our results through instrumental variable methods using information on geography, cultural distance and institutions.