Institutional distance, trade agreements, and intellectual property trade networks: Evidence from cross-border data.

Abstract

Based on the Temporal Exponential Random Graph Models (TERGM), this paper applies global intellectual property trade data between countries to investigate the impact and mechanism of institutional distance on the intellectual property trade network. The study finds that the smaller the institutional distance between countries, the more conducive it is to build an intellectual property trade network. This conclusion remains valid after controlling for geographical adjacency, use of a common language, existence of colonial relationships, and characteristics of the intellectual property trade network. Moreover, through regression by year, it is found that this impact increases year by year. Further, after regressing on sub-indicators of institutional distance, it is found that the smaller the distance in political stability, government efficiency, and regulatory quality, the greater the probability of generating an intellectual property trade relationship. Mechanism analysis reveals that economies with smaller institutional distances are more likely to sign trade agreements, thereby generating trade relationships and promoting the establishment of intellectual property trade networks. In order to deeply participate in the intellectual property trade network, countries should actively align with international institutional norms and sign bilateral or multilateral trade agreements with countries with similar institutional levels to enhance the production level and export of intellectual property.