Impact of Intellectual Property Rights on Activity of Cross-Border Mergers and Acquisitions

The world economy is getting more innovative, the importance of intellectual capital is increasing, and international mergers and acquisitions (M&A) increasingly involve intellectual property each year. There is an ongoing debate around the world about the extent to which the countries should protect the intellectual property rights (IPR). The right choice of IPR protection can significantly influence the economy of the countries and create a way of technology and knowledge transfer to the emerging countries through the dramatically growing number of cross-border M&A. It can result in the economic development of poor countries and a drop of global inequality. There are many researches about the connection of IPR protection, innovation and FDI, however not much is known about the influence of IPR protection on cross-border M&A activity. This interdisciplinary research, which unites international trade, macroeconomics and corporate finance, studies the set of more than 115 000 cross-border M&A in 64 developed and emerging countries from 1985 to 2017. This is the first study, where the difference of IPR and M&A connection is compared in detail for emerging and developed countries, the existence of optimal IPR protection level is checked and the time period is extended until 2017. It is found that better IPR protection in a target county attracts international M&A activity and this effect is higher if the target company if from a less developed country than the acquirer. On contrary, this impact is negative if the target and acquirer are both from the developed countries. Stronger IPR protection in the developed acquirers’ countries discourage international M&A activity, while this protection in the emerging acquirer countries stimulates them. Also, there is a U-shaped relationship between the IPR protection in a target county and international M&A activity at the post-TRIPS period after the global increase in IPR protection.