International Business Research; Vol. 10, No. 5; 2017 ISSN 1913-9004 E-ISSN 1913-9012 Published by Canadian Center of Science and Education 127 Cognitive Abilities, Democracy and Intellectual Property Rights Protection Shoirahon Odilova 1 , Xiaomin Gu 2 1PhD Candidate at Business & Management School, Donghua University, Shanghai, China 2Professor at Business & Management School, Donghua University, Shanghai, China Correspondence: Shoirahon Odilova, PhD Candidate at Business & Management School, Donghua University, China. Received: January 16, 2017 Accepted: April 17, 2017 Online Published: April 24, 2017 doi:10.5539/ibr.v10n5p127 URL: https://doi.org/10.5539/ibr.v10n5p127 Abstract The goal of this research is to investigate the link between cognitive abilities, as measured by cognitive abilities index and intellectual property rights protection using cross-national data. The findings suggest that cognitive abilities at a national level are significantly related with IPR protection. As expected intellectual capacity is positively and significantly related to the intellectual property rights and explain nearly 23% of cross national differences. In particular, a one standard deviation increase in the cognitive abilities index is associated with slightly less than a half standard deviation rise in IPR index. However, 65% of the effect of cognitive abilities on IPR protection is mediated by the democratic institutions. Keywords: cognitive capital, intellectual, property protection 1. Introduction A ballooning body of cross country studies investigates the impact of cognitive abilities on economic growth and GDP per capita, as well as a number of other socio-economic factors (Salahodjaev, 2015a; Salahodjaev, 2015b; Whetzel & McDaniel, 2006; Ram, 2007). Moreover, a number of follow up papers find that cognitive abilities are instrumental to antecedents of economic growth such as institutions (Kanyama, 2014) and credit sector size (Kodila-Tedika & Asongu, 2015) and corruption (Potrafke, 2012). Although, related studies find that cognitive abilities is an antecedent of quality of institutional arrangements, the link between cognitive abilities and protection of intellectual property has not been explored up to this date. Taking into account that intellectual property rights (IPR) are beneficial for economic growth (Thompson & Rushing, 1996; Adams, 2009), cognitive abilities may also be indirectly related on economic growth via this channel. Thus, the goal of this research is to explore this relationship. There are several channels: successfulness of economic policies, rule of law and soundness of institutions and human abilities. Earlier studies show that human abilities, as estimated by a cognitive abilities index, is a robust antecedent of GDP per capita and economic growth. For instance, Weede and Kampf (2002) argue that ‘standard indicators of human capital endowment — like literacy, school enrollment ratios or years of schooling — suffer from a number of defects. They are crude. Mostly, they refer to input rather than output measures of human capital formation. Occasionally, they produce implausible effects. They are not robustly significant determinants of growth. Here, they are replaced by average intelligence. This variable consistently outperforms the other human capital indicators in spite of suffering from severe defects of its own. The immediate impact of institutional improvements, i.e., more government tolerance of private enterprise or economic freedom, on growth it is in the same order of magnitude as intelligence effects are’ (p. 380). Johnes and Schneider (2004) using cross- national data for the cognitive abilities index explore the effect of intellectual capital on economic growth. The study adopts a cross national growth regression model and finds that in growth regressions that include only robust control variables, IQ is statistically significant in 99.7% of these 1330 regressions. Similarly, Hunt and Whittman (2008) further find that intelligence is significant ly related to economic development, although they ‘question the simple explanation that national intelligence causes national wealth’ (p.1). In addition, cognitive abilities may also be related to the intellectual property right via quality of legal arrangements. For example, Potrafke (2012) shows that in countries with higher average intellectual abilities