International Technology Licensing, Intellectual Property Rights, and Tax Havens

This paper investigates the determinants of international technology licensing using data for 50 countries during 1996-2012. A multi-country model of innovation yields a dynamic structural gravity equation for royalty payments as a function of fundamentals, including imperfect intellectual property protection and differences in corporate taxation. The gravity equation is estimated with nonlinear methods. Model's fundamentals account for about 60% of the variation in royalty payments. A quantitative analysis sheds light on the impact of global taxation reforms on international technology licensing and innovation. The findings highlight the role of taxation in shaping cross-border technology flows and the consequences of profit-shifting.