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Incomplete Appropriability of R&D and the Role of Strategies and Cultural Factors in International Trade: A Japanese Case

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  • Ryuzo Sato
  • Rama Ramachandran
  • Shunichi Tsutsui
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    Abstract

    One of the proudest achievements of classical and neoclassical economics is the derivation of the superiority of free trade. This result is obtained by assuming constant returns to scale, perfect competition and absence of externalities. The recent realization that the incomplete appropriability of R&D is a main source of externalities and hence the effect of R&D on national welfare is potentially subject to strategic manipulations necessitates a careful examination of these assumptions. This paper discusses R&D and diffusion of technology in international trade from two different perspectives. In Section II, we consider the role of cultural, social and historical factors in the appropriation of technology by reviewing how Japan has appropriated foreign technology. In Section III, we survey three strategic trade models to obtain some insights into the role of R&D and diffusion of technology in the context of imperfect competition. The issues we discuss include the effectiveness of R&D polices by a national government and the impact of R&D policies and diffusion of technology on the incentive to do R&D and on the outcome of trade.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3797.

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    Date of creation: Aug 1991
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    Handle: RePEc:nbr:nberwo:3797

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    1. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
    2. Krugman, Paul R, 1987. "Is Free Trade Passe?," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 131-44, Fall.
    3. Bernstein, Jeffrey I & Nadiri, M Ishaq, 1989. "Research and Development and Intra-industry Spillovers: An Empirical Application of Dynamic Duality," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 249-67, April.
    4. Barbara J. Spencer & James A. Brander, 1983. "International R&D Rivalry and Industrial Strategy," NBER Working Papers 1192, National Bureau of Economic Research, Inc.
    5. Levinsohn, James A., 1989. "Strategic trade policy when firms can invest abroad: When are tariffs and quotas equivalent?," Journal of International Economics, Elsevier, vol. 27(1-2), pages 129-146, August.
    6. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
    7. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
    8. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    9. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
    10. Myllyntaus, Timo, 1990. "The Finnish Model of Technology Transfer," Economic Development and Cultural Change, University of Chicago Press, vol. 38(3), pages 625-43, April.
    11. Fung, K C, 1989. "Tariffs, Quotas, and International Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 749-57, October.
    12. Deolalikar, A.B. & Evenson, R.E., 1988. "Technology Production And Technology Purchase In Indian Industry: An Econometric Analysis," Papers 556, Yale - Economic Growth Center.
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