| By: |
Peter Eppinger;
Bohdan Kukharskyy;
Alireza Naghavi;
Gianmarco I. P. Ottaviano |
| Abstract: |
We examine how firms strategically slice up global production processes to
protect proprietary know-how. By sourcing fewer inputs from each supplier,
firms avoid the concentration of information in the hands of individual
suppliers and thereby reduce the risk of imitation. Using rich micro data on
firm-to-firm trade in automotive components, we uncover a robust U-shaped
relationship between the number of components sourced per supplier
(concentration) and the strength of intellectual property rights (IPR)
protection. This U-shape can be rationalized by a combination of a protective
effect and a compositional effect of IPR institutions. In countries with weak
IPR protection, firms source only low-tech components, for which imitation is
irrelevant, so concentration is optimal. At intermediate IPR levels, they buy
more high-tech, imitation-prone components and therefore 'slice to protect'.
Under strong IPR regimes, imitation risk is minimal and concentration is
highest. Empirically, weak IPR institutions strongly predict slicing of
high-tech components. |
| Keywords: |
intellectual property rights, global value chains, production, technology, imitation, automotive industry, fragmentation, multinational firms |
| JEL: |
F12 F14 F21 F23 L23 L24 L25 O32 O34 |
| Date: |
2026 |
| URL: |
https://d.repec.org/n?u=RePEc:ces:ceswps:_12694 |