How IP Supports Economic Development in Emerging Markets

Introduction

Emerging economies increasingly recognize that the intellectual property (IP) system is not a niche legal field but a catalyst for broader social and economic transformation. In a global economy driven by knowledge and innovation, robust IP systems help countries capture value from creativity and technological know‑how. IP rights such as patents, trademarks, geographical indications, and copyrights protect the creations of the mind and encourage investment in ideas. UNCTAD notes that properly designed IP rights can unlock innovation, boost trade, attract investment, and promote technological upgrading in least developed countries (LDCs). The World Intellectual Property Organization (WIPO) similarly stresses that IP protection is an important component of national economic policy and that governments face complex choices in designing IP systems to meet policy objectives. When emerging markets build capacity to protect and leverage intangible assets, they lay the groundwork for sustainable economic growth.

Why IP matters for emerging economies

Intellectual property is increasingly seen as a “power tool” for economic growth. Strategic use of IP helps transform knowledge into tradable economic assets, encouraging investment in research and development (R&D) and attracting foreign direct investment (FDI). The report highlights that patents, trademarks, geographical indications, and copyright can all be used to promote business development and economic growth.

Incentivizing innovation

Economists see IP as a key mechanism for incentivizing innovation. The World Intellectual Property Report 2024 emphasises that to bridge the gap between rich and poor countries, economies must diversify by building, diversifying, and applying knowledge embodied in technology. Knowledge exists not only in machines but also in codified documentation and tacit skills; because tacit knowledge is difficult to transfer, technological capabilities tend to concentrate in certain countries. IP rights encourage domestic innovators to invest in R&D by providing exclusive control over inventions, artistic works, and brands. In the UNCTAD/Commonwealth report on LDCs, the authors note that a stronger IP regime can make investment climates more attractive, thereby encouraging multinational firms to transfer advanced technologies. A one‑percent increase in patent‑rights strength is associated with a more than two‑percent increase in the stock of inward FDI.

Facilitating technology transfer and FDI

Evidence suggests that good protection and enforcement of IP rights are key to promoting international technology transfer, which is important for economic growth, especially in developing economies. A study summarized by the Federal Reserve Bank of St. Louis found that royalty payments – a proxy for foreign technology adoption – are positively related to a country’s IP protection index. Countries with stronger IP protection receive more technology from abroad, whereas those with weak IP enforcement tend to receive less technology. As adoption of foreign technologies enables countries far from the technology frontier to grow and eventually innovate, policies that strengthen IP protection are crucial for development.

Promoting trade and export competitiveness

IP protection can help firms build reputation and market differentiation, which, in turn, raises export value. UNCTAD describes how registering a geographic indication for Cambodia’s Kampot pepper enabled farmers to more than triple their income. Similarly, Ethiopia’s program to trademark its coffee brands increased export prices by 275 percent. These examples illustrate how IP tools allow developing countries to capture a larger share of value within global value chains and shift from commodity dependence to higher‑value activities.

Types of IP rights and their economic benefits

Different forms of IP protection offer distinct development benefits. The table below summarizes key IP tools and sectors where they are most relevant, based on the UNCTAD/Commonwealth report and WIPO guidance.

IP right	Typical economic role in emerging markets	Relevant sectors
Patents	Encourage investment in R&D by granting inventors exclusive rights for a limited period; facilitate technology licensing and transfer; patents can attract investors and venture capital.	High‑technology manufacturing, pharmaceuticals, ICT, and renewable energy.
Utility models	Provide quick and inexpensive protection for minor innovations and adaptations; encourage domestic innovators and SMEs to develop incremental improvements.	Light manufacturing, engineering adaptations, incremental process improvements.
Trademarks	Protect brands and signal quality, helping firms build reputation and compete in domestic and export markets; encourage investment in marketing and R&D.	Agribusiness and food products, textiles, consumer goods, and services.
Geographical indications (GIs)	Link product quality and reputation to place of origin; enable rural communities to command price premiums.	Agricultural products (coffee, pepper, tea, cheeses), crafts.
Industrial designs	Protect the aesthetic aspects of products; important for fashion, furniture, and consumer goods industries.	Apparel, electronics, ceramics, automotive components.
Copyright	Protect literary and artistic works and creative content; vital for creative and cultural industries.	Music, film, publishing, software, digital content.

Economic benefits: investment, trade, and innovation

IP as a magnet for foreign investment

Strong IP regimes signal that a country is serious about protecting investors’ rights. The UNCTAD/Commonwealth report stresses that the strength of IP protection and contract enforcement significantly affects where multinational firms invest and whether they transfer advanced technologies. By improving IP protection, LDCs and emerging markets can enhance their prospects as locations for knowledge‑based industries.

Licensing and commercialisation

Intellectual property rights allow companies to license technology or creative content to third parties, thereby generating revenue while promoting the distribution of technology. Licensing can establish collaborations that facilitate knowledge exchange and enhance local capabilities. The WIPO observes that enterprises, ranging from multinationals to small and medium-sized businesses, can gain advantages by acquiring intellectual property assets and participating in licensing agreements; these endeavours foster competition, generate lucrative business prospects, and create employment chances.

Enhancing value chains

By safeguarding brands and product designs, intellectual property enables enterprises to go from low-value manufacturing or commodity production to higher-value segments within the value chain. Geographical indications and trademarks can provide elevated pricing, exemplified by Kampot pepper and Ethiopian coffee. When companies spend on design, marketing, and quality assurance, they distinguish their products and secure more favourable conditions in international trade. Such measures enhance export diversification and resilience for emerging economies.

Fostering innovative ecosystems

Patents and utility models promote domestic innovation by incentivising inventors and offering publicly accessible technical information. The UNCTAD/Commonwealth report underscores that patents can assist innovators in LDCs in commercialising inventions, attracting investment, and fostering additional innovation cycles. Utility models provide a more accessible means of protection for modest innovations and technical modifications, offering prompt and cost-effective incentives for small and medium-sized enterprises (SMEs). Enhancing intellectual property regulations, therefore, bolsters the advancement of local innovation ecosystems and knowledge-intensive industries.

Developing IP systems: policy and capacity

Strengthening national IP frameworks

UNCTAD underscores the need for LDCs and emerging economies to strengthen their domestic IP ecosystems through balanced policies. Reforms should mainstream IP protection within national development strategies and improve institutional capacity for IP administration, enforcement and regulation. The Agreement on Trade‑Related Aspects of Intellectual Property Rights (TRIPS) offers flexibilities that can be leveraged, but effective implementation requires legal expertise and public awareness. Enforcement is a multi‑layered concept: beyond police and customs, it depends on political will, an appropriate legislative framework and cultivation of an IP culture.

Capacity building and technology absorption

Emerging markets must also develop the absorptive capacity needed to learn from foreign technology. WIPO Director‑General Daren Tang stresses that technology transfer only makes a difference when local stakeholders have the skills to absorb and deploy it. Capacity building includes training patent examiners, judges, entrepreneurs, and researchers; establishing Technology and Innovation Support Centers (TISCs) and knowledge transfer offices; and fostering collaboration between universities and industry.

Informal innovation and alternative protections

UNCTAD research finds that innovation in LDCs often occurs in the informal sector, which can represent at least 35 percent of GDP. Informal innovators may rely on trade secrets, contracts, or community norms rather than formal IP rights. Tailored support mechanisms – such as simplified utility‑model systems or collective trademarks – can complement formal IP rights and help micro‑enterprises protect their knowledge.

Conclusion

Intellectual property is no longer a peripheral legal matter—it is central to how economies create, capture, and share value. For emerging markets, a well‑designed and effectively enforced IP system can stimulate innovation, attract investment, support trade diversification, and unlock new sources of financing.