The Endogeneity of Knowledge Creation and Emergence of National Intellectual Property Rights Regimes

In this paper we argue that the degree of internalization of knowledge creation could help deter-
mine the strength of a country's intellectual property rights regime (IPRR). We use the literature
on economic growth and IPRR to model a four-stage evolutionary path of knowledge creation
from exogenous to endogenous sources; that is, importing initially from foreign sources to ulti-
mately generating domestically by firms in the public, semi-private, and private domains. As a
nation becomes scientifically and technically more robust and innovative from within, the intrin-
sic motivation to strengthen its IPRR becomes stronger, leading to greater economic and social
welfare.
We use India as a case study to discuss our model. India recently passed legislation to make its
IRRR comply with its WTO commitments. Using our model, we argue that the gradual emer-
gence of a highly innovative pharmaceutical industry in India was a major indicator of India's
evolution from a weak to strong enforcer of intellectual property rights. We conclude by pointing
out the benefits of international trade and knowledge transfer for greater economic growth in the
global economy.