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This paper develops a product cycle model with endogenous innovation, imitation, and foreign direct investment (FDI). We use this model to determine how stronger intellectual ; property rights (IPR) protection in the South affects innovation, imitation and FDI. We find that stronger IPR protection keeps multinationals safer from imitation, but no more so than Northern firms. Instead, the increased difficulty of imitation generates resource wasting and imitation disincentive effects that reduce both FDI and innovation. The greater resources absorbed in imitation crowd out FDI. Reduced FDI then transmits resource scarcity in the South back to the North and consequently contracts innovation. Keywords: Innovation; Imitation; Intellectual property rights; Foreign direct investment; Product cycles JEL classification: F21; F43; O31; O34

The global community should work towards a consensus allowing for multiculturalism in its regulation of information technology. Identity of protection will be impossible to achieve, but nations can work toward uniform standards which are flexible enough to be in keeping with each nation's culture while achieving uniform technological protection. The standards must consider the economic impact on both developed and developing countries. Existing intellectual property treaties may be a good starting point.

International trademark law is undergoing change which will facilitate protection in foreign countries. There are changes due to the General Agreement on Tariffs and Trade (GATT), the North American Free Trade Agreement, the Madrid Protocol and the Draft Trademark Law Treaty proposed by the World Intellectual Property Organization. These changes embrace the expansion of global trade while protecting trademarks.

The administration of Pres Bill Clinton will deal with many intellectual property issues, including domestic policy and international trade law. Intellectual property matters exist in the General Agreement on Tariffs and Trade and the North American Free Trade Agreement. The US Patent and Trademark Office will be closely involved in these activities, and the office intends to protect the interests of inventors and businessmen.

China has reformed its patent law to fit the practices of international treaties, and it has thereby facilitated foreign investments and technology transfer. Patent protection has been broadened, and the Patent Cooperation Treaty was embraced in 1992. The Chinese Patent Office has created enabling regulations, and the judiciary and administrative agencies have been developed to handle added patent rights.

Western industries may have intellectual property problems with other nations. For example, developing countries take different views on information ownership than developed countries. China, Japan and India provide examples. While some international standardization exists in the General Agreement on Tariffs and Trade, private and bilateral negotiations may be necessary to give proper protection.

Private property forms the bedrock of the business/society relationship in a market economy. In one way or another most societies limit what people can claim as property as well as the extent of claims they can make regarding it. In the international arena today intellectual property rights are a focal point of debate. Many developing countries do not recognize the monopoly claims of patents and copyrights asserted by business as legitimate. This paper reviews contemporary areas of dispute and then presents the tasks facing the construction of a fair intellectual property rights regime.