International Technology Transfers and Competition

This paper analyzes North-South technology transfers in a model of oligopolistic competition. 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 low-cost 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 use technology transfers strategically to influence the competitive environment on 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 firms in the North