Strategic Licensing, Exports, FDI, and Host Country Welfare

Posted: 22 Dec 2009

Date Written: 2009


This paper analyses the preference of a foreign firm over serving a host country market and its impact on the host country welfare. We show that the foreign firm can choose licensing its superior technology to a host firm strategically which influences the foreign firm's subsequent preference over exporting and FDI. The effect on the host country welfare depends on the structure of license fee and it is shown that strategic licensing might lead to welfare loss for the host country. To this end this paper also prescribes either an optimal tariff scheme or a ban on licensing to maximize the host country welfare.

Keywords: D43, F13, F23, L13

Suggested Citation

Sinha, Uday Bhanu, Strategic Licensing, Exports, FDI, and Host Country Welfare (2009). Oxford Economic Papers, Vol. 62, No. 1, pp. 114-131, 2010, Available at SSRN: or

Uday Bhanu Sinha (Contact Author)

Indian Statistical Institute ( email )

203 B. T. Road
Kolkata, West Bengal 700108

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