International technology transfer and the technology gap

Abstract We build a quality ladders product cycle model that explores how the quality of technology transferred through foreign direct investment (FDI) is linked to innovation and imitation when the absorptive capacity of LDCs is limited. Successful imitation of low quality levels makes FDI involving high quality levels possible through reduction of the technology gap. A subsidy to imitation or a tax on low quality FDI production encourages imitation relative to innovation, thus releasing the constraint faced by foreign firms seeking to produce in the South. These forces that stimulate high-quality FDI raise Southern welfare through lower prices, faster innovation and higher wages.

[1]  Howard Pack,et al.  Inflows of Foreign Technology and Indigenous Technological Development , 1997 .

[2]  P. Segerstrom,et al.  A Schumpeterian Model of the Product Life Cycle , 1990 .

[3]  Wolfgang Keller,et al.  Absorptive capacity: On the creation and acquisition of technology in development , 1996 .

[4]  Elhanan Helpman,et al.  VERTICAL PRODUCT DIFFERENTIATION AND NORTH-SOUTH TRADE , 1987 .

[5]  R. Findlay,et al.  Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model , 1978 .

[6]  Kamal Saggi,et al.  Foreign Direct Investment and the Nature of R&D , 1999 .

[7]  C. Maule.  World Investment Report, 1992: Transnational Corporations as Engines of Growth , 1993 .

[8]  A. Rodrı́guez-Clare.  Multinationals, Linkages, and Economic Development , 1996 .

[9]  Nancy L. Stokey.  The Volume and Composition of Trade Between Rich and Poor Countries , 1991 .

[10]  E. Mansfield,et al.  Technology Transfer to Overseas Subsidiaries by U. S.-Based Firms , 1980 .

[11]  J. Markusen.  The Boundaries of Multinational Enterprises and the Theory of International Trade , 1995 .

[12]  Nagesh Kumar.  Multinational Enterprises and Industrial Organization: The Case of India , 1994 .

[13]  A. Kokko.  Technology, market characteristics, and spillovers , 1994 .

[14]  Walter Goldstein,et al.  The Multinational Corporation and the Resource Cost of International Technology Transfer by David J. Teece (review) , 1977 .

[15]  N. S. Siddharthan.  Transaction costs, technology transfer, and in-house R&D : A study of the Indian private corporate sector , 1992 .

[16]  Homi Katrak,et al.  Imported technologies and R&D in a newly industrialising country: The experience of Indian enterprises , 1989 .

[17]  Elhanan Helpman,et al.  Quality Ladders and Product Cycles , 1989 .

[18]  T. Blumenthal.  Japan's technological strategy , 1976 .

[19]  Amy Jocelyn Glass,et al.  Product Cycles and Market Penetration , 1997 .