Multinational firms and technology transfer
AbstractThe authors construct an oligopoly model in which a multinational firm has a technology superior to those of local firms in the host country. Workers employed by the multinational acquire knowledge of the superior technology and can spread their knowledge to local firms by switching employers. The multinational chooses to pay a wage premium to prevent local firms from hiring away its workers if the local firms are sufficiently disadvantaged or if there are enough local firms. Diffusion of the superior technology benefits local firms at the expense of workers, whose wages suffer. The host government might have an incentive to attract foreign direct investment even when technology transfer will not result, because of the wage premium local employees of the multinational firm earn. Also, foreign direct investment with technology transfer may reduce the total economic rent the host country earns.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 2067.
Date of creation: 28 Feb 1999
Date of revision:
Foreign Direct Investment; General Technology; Environmental Economics&Policies; ICT Policy and Strategies; Education for the Knowledge Economy;
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