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［Abstract］

In global supply chains, firms may need to share their technological know-how with suppliers, exposing themselves to imitation in countries with weak intellectual property rights (IPR) protection. We study this phenomenon using global micro data on supplier relationships in the automotive industry for individual car components. The data suggest that car producers use two strategies to protect their knowledge in countries with weak IPR protection: First, they slice up production across suppliers to avoid the concentration of know-how in the hands of a single supplier. Second, they rely on suppliers controlled by multinationals firms from countries with strong IPR protection, which abide by their home institutions and thus effectively protect knowledge within firm boundaries. We formalize these ideas in a theoretical model, which rationalizes the empirically observed relationship between the concentration of components per supplier and IPR protection.