Openness, Technology Capital, and Development
35 Pages Posted: 16 Oct 2007 Last revised: 6 Jun 2022
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Openness, Technology Capital, and Development
Date Written: October 2007
Abstract
In this paper, we extend the growth model to include firm-specific technology capital and use it to assess the gains from opening to foreign direct investment. A firm's technology capital is its unique know-how from investing in research and development, brands, and organization capital. What distinguishes technology capital from other forms of capital is the fact that a firm can use it simultaneously in multiple domestic and foreign locations. Foreign technology capital is exploited by permitting foreign direct investment by multinationals. In both steady-state and transitional analyses, the extended growth model predicts large gains to being open.
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