The study investigates whether raising technology transfer and strengthening the intellectual property rights (IPR) regime trigger domestic innovation by employing a panel data analysis for 58 developed and developing countries in the 1960-2010 period. Since theoretical and empirical literature has proved that innovation and technology were the prominent drivers of development process, analyzing the determinants of these factors have become crucial. Due to the globalization process, knowledge spreads faster than any other social and economic indicators; which makes the interactions between the types of knowledge more important. Thus, the study analyzes the impacts of foreign patents (as a proxy for technology transfer) and IPR on domestic innovation. According to the empirical analysis, it is found that technology transfer triggers domestic innovation both in developed and developing world. Contrary, it is also found that intellectual property protection is a detrimental factor for domestic innovation in mid income group while it bears fruit in high income group.