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Trade liberalization, technology transfer, and endogenous R&D


  • Hong Hwang
  • Sugata Marjit
  • Cheng-Hau Peng


It is generally believed that trade liberalization impedes technology transfers from abroad. By considering R&D behaviour of the foreign firm, this paper shows contrarily that trade liberalization has a positive effect on the foreign firm’s R&D, resulting in a better technology to be transferred to the domestic firm and enhancing both the domestic and the world welfare. This result holds even if trade liberalization originates from non-tariff barriers such as quotas. Moreover, by comparing the levels of technology transfer between the two regimes, we find that if the trade barrier is high (low), the technology transferred from the foreign firm under the equivalent quota regime is superior (inferior) to that under the tariff regime. Finally, a ban on technology export by the foreign country may surprisingly induce the foreign firm to invest more in its R&D.

Suggested Citation

  • Hong Hwang & Sugata Marjit & Cheng-Hau Peng, 2016. "Trade liberalization, technology transfer, and endogenous R&D," Oxford Economic Papers, Oxford University Press, vol. 68(4), pages 1107-1119.
  • Handle: RePEc:oup:oxecpp:v:68:y:2016:i:4:p:1107-1119.

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    Cited by:

    1. Hwang, Hong & Hsueh, Yi-Shan & Peng, Cheng-Hau, 2018. "Trade liberalization and product R&D in a differentiated duopoly," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 34-38.
    2. Kollias, Iraklis & Marjit, Sugata & Michelacakis, Nickolas, 2017. "Public Investment, Taxation and Transfer of Technology," MPRA Paper 78853, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets


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