Multinationals, Technological Incompatibilities, and Spillovers

37 Pages Posted: 19 Jul 2010

See all articles by Juan Carluccio

Juan Carluccio

Banque de France; Paris School of Economics

Thibault Fally

UC Berkeley - ARE Department

Date Written: June 2010

Abstract

Empirical studies provide evidence of positive spillovers from multinational firms to upstream suppliers coupled with negative spillovers to firms in the same industry. This paper shows that these empirical regularities can be rationalized in a model with incompatibilities between foreign and domestic technologies. When foreign technologies require specialized inputs, some local suppliers self-select into production for multinational firms. This ”technological segmentation” in the upstream industry magnifies the productivity advantage of multinationals by restricting backward and forward linkages to groups of firms using the same technology. In this setting, we study the role of heterogeneity among domestic firms. We show that only the best suppliers adopt the foreign technology and cater to multinationals. In the long run, technology adoption by the most productive downstream firms creates complementarities with multinationals that can offset the negative impact of segmentation.

Keywords: externalities, multinational firms, technological incompatibilities

JEL Classification: F23, O14

Suggested Citation

Carluccio, Juan and Fally, Thibault, Multinationals, Technological Incompatibilities, and Spillovers (June 2010). CEPR Discussion Paper No. DP7869, Available at SSRN: https://ssrn.com/abstract=1640391

Juan Carluccio (Contact Author)

Banque de France ( email )

Paris
France

Paris School of Economics ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Thibault Fally

UC Berkeley - ARE Department ( email )

Berkeley, CA 94720
United States

HOME PAGE: http://are.berkeley.edu/~fally/

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