Slice to Protect – Peter S. Eppinger

Speaker

Peter S. Eppinger (University of Tubingen)

Abstract

In global supply chains, firms may need to share their technological know-how with suppliers, exposing themselves to the risk of imitation in countries with weak protection of intellectual property rights (IPR). We argue that firms may slice up production as a means to protect their know-how: By sourcing fewer components from each supplier, they avoid sharing too much information about the production process with any individual supplier. We study this phenomenon using global micro data on firm-to-firm trade in automotive components. The data reveal a U-shaped relationship between the number of components sourced from the same supplier and IPR protection: Firms tend to concentrate on few suppliers in very weak IPR environments, slice up production across more suppliers in an intermediate range of IPR protection, and increasingly concentrate component production where IPR enforcement is strong. We offer a simple theoretical model that formalizes the slice-to-protect strategy and predicts that this strategy is most effective at intermediate levels of IPR protection, rationalizing the U-shaped pattern.

Authors

Peter S. Eppinger (University of Tubingen) – Bohdan Kukharskyy (City University of New York) – Alireza Naghavi (University of Bologna) – Gianmarco I. P. Ottaviano (Bocconi University)

Room

Virtually via Zoom  – if interested, please send an Email to kcg-office@ifw-kiel.de to receive the Seminar-Link to the seminar.

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