International Technology Transfers and Competition

Abstract

This paper analyzes North–South technology transfers in a model of oligopolistic competition and spatial product differentiation. Two firms in the North supply a high-tech good and a technically related low-tech good. They decide about licensing the low-tech good to suppliers in the South. With the license Southern firms get access to technology from the North, which enables them - with a certain probability - to enter the market for the high-tech good. Northern firms may therefore license strategically to influence the competitive environment in the high-tech market. In this setting, multiple equilibria with and without licensing may arise, and the resulting outcomes may be inefficient from the viewpoint of the Northern firms.