The basic competitive model with freely available technology is suited for static industries but misleading as applied to major innovative economies for which development of new technologies equals in magnitude around 10% of gross domestic investment. We distinguish free generic technology from...

This paper is based on the model of backward linkages from foreign direct investment (FDI) Lin/Saggi (2003), where the market structure of the final goods sector is represented by a monopoly or Cournot oligopoly, and the supplier sector - by a pure monopoly. We extend this model by examining...

So long as the entry and exit of firms using the generic technology sets the price in an industry, one or more price-taking firms can coexist with proprietary technologies yielding more or less substantial quasi-rents to the sunk development costs. Consumer welfare is increased if an innovator...