Abstract: The Emergence of Rights-Based Multinationals: Sunk Costs, Property Rights and the Political Economy of Globalization, 1870-2000

Gerben Bakker

Abstract

This paper argues that the legal and institutional evolution of intellectual property rights went hand in hand with a new form of organization for their 'production' and distribution. The rights-based multinational is defined as an organization that focused on generating intellectual property rights and maximizing and capturing their rents. It linked an international federation of idiosyncratically dispersed R&D units (each with a maximum scale and scope) to a global distribution system with subsidiaries in all major markets and a minimum scale and scope. The portfolio of rights generated enabled the diversification of risk. An essential feature was that sunk costs were extremely high, while marginal costs were infinitesimal. Combining economic history with transaction cost and institutional economics, this paper explores the political, economic, and social implications of 'zero' marginal costs for the process of globalization and examines the development of rights-based multinationals in industries such as pharmaceuticals, software, and music.