R&D PRODUCTIVITY AND INTELLECTUAL PROPERTY RIGHTS *

We study firms' preferences towards intellectual property rights (IPR) regimes in a North–South context, using a simple duopoly model where a ‘North’ and a ‘South’ firm compete in a third market. Unlike other contributions in this field, we explicitly introduce the South's capability to undertake cost‐reducing R&D, but maintain the South's inferiority in using and managing its R&D. In contrast to traditional results, we show that the North may encourage lax IPR protection provided that its South rival's R&D productivity is not too low. In this sense, our results do not support the idea of universal or uniform IPR protection regime.