Many previous studies have investigated the impacts of intellectual property rights protection on international trade. They have aimed to analyze the relationship between intellectual property rights and export, establishing an affiliate abroad and licensing. Some studies have considered the effects of intellectual property rights protection on multiple channels of trade empirically. However, it is impossible to compare the impacts on these three channels directly, because the measure of licensing is different from the other two.
This paper examines the impacts of intellectual property protection on US firms' decisions about serving foreign market; whether by establishing an affiliate abroad and/or licensing knowledge assets to an unaffiliated firm. We focus on loyalties and license fees account in the US balance of payments.