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A Decision Theoretic Model of Innovation, Technology Transfer, and Trade

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  • Richard Jensen
  • Marie Thursby

Abstract

We analyse a dynamic North-South model of innovation, technology transfer, and trade. Northern firms conduct R&D using labour which has alternative uses producing in the R&D sector or a nontraded good sector. Since technology transfer prevents the North from fully appropriating benefits of R&D, the optimal rate of innovation for either profit maximizing firms or a utility maximizing Northern planner is less than globally optimal. An increased transfer rate intensifies competition of lower wage Southern workers with Northern workers in production, so profit maximizing Northern firms (irrespective of their number or cooperation in R&D) reallocate labour toward R&D.

Suggested Citation

  • Richard Jensen & Marie Thursby, 1987. "A Decision Theoretic Model of Innovation, Technology Transfer, and Trade," Review of Economic Studies, Oxford University Press, vol. 54(4), pages 631-647.
  • Handle: RePEc:oup:restud:v:54:y:1987:i:4:p:631-647.
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    File URL: http://hdl.handle.net/10.2307/2297486
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    Citations

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    Cited by:

    1. Grossman, Gene M & Helpman, Elhanan, 1989. "Product Development and International Trade," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1261-1283, December.
    2. Pol Antràs, 2005. "Incomplete Contracts and the Product Cycle," American Economic Review, American Economic Association, vol. 95(4), pages 1054-1073, September.
    3. Kala Krishna & Marie Thursby, 1997. "Whither Flat Panel Displays?," NBER Chapters, in: The Effects of U.S. Trade Protection and Promotion Policies, pages 247-271, National Bureau of Economic Research, Inc.
    4. Yuxiang Zou & Tai-Liang Chen, 2018. "Industrial heterogeneity and international product cycles," Journal of Economics, Springer, vol. 125(1), pages 1-25, September.
    5. Glass, Amy Jocelyn & Saggi, Kamal, 2001. "Innovation and wage effects of international outsourcing," European Economic Review, Elsevier, vol. 45(1), pages 67-86, January.
    6. Teteryatnikova, Mariya, 2018. "R&D in trade networks: The role of asymmetry," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 307-350.
    7. Lin, Hwan C., 2010. "Optimizing international technology diffusion: A middle-income country's perspective," Economic Modelling, Elsevier, vol. 27(1), pages 54-66, January.
    8. Lin, Hwan C., 2010. "Technology diffusion and global welfare effects: Imitative R&D vs. South-bound FDI," Structural Change and Economic Dynamics, Elsevier, vol. 21(4), pages 231-247, November.
    9. Michael Fung, 1994. "Technology policies, technology transfer by multinational enterprises and R&D activities in LDCs," Open Economies Review, Springer, vol. 5(3), pages 275-287, July.
    10. Susan Chun Zhu, 2004. "Trade, product cycles, and inequality within and between countries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(4), pages 1042-1060, November.
    11. Ma, Yan, 2015. "The product cycle hypothesis: The role of quality upgrading and market size," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 326-336.
    12. Sascha Becker & Peter Egger, 2013. "Endogenous product versus process innovation and a firm’s propensity to export," Empirical Economics, Springer, vol. 44(1), pages 329-354, February.
    13. Zhu, Susan Chun, 2005. "Can product cycles explain skill upgrading?," Journal of International Economics, Elsevier, vol. 66(1), pages 131-155, May.
    14. Tomasz Brodzicki, 2017. "Internationalisation and Innovation Intensities of Polish Manufacturing Firms: A Close Nexus?," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 5(1), pages 91-109.
    15. Liu, Ying & Wang, Zhe & Yin, Xiaopeng, 2016. "Economic integration, product cycles and regime effects," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 275-283.
    16. Tomasz Brodzicki, 2016. "Innovation intensity as a driver of firm’s internationalization intensity: evidence for Poland," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 46.
    17. Reed, Michael & Salvacruz, Joseph, 1995. "Technological Progress and International Trade: The Case of the Less Developed ASEAN Countries," 1994 Conference, August 22-29, 1994, Harare, Zimbabwe 183397, International Association of Agricultural Economists.
    18. Baldwin, John R. Lileeva, Alla, 2008. "Adapting to Import Competition: Effects of Low-wage Trade on Commodity Mix in Canadian Manufacturing Plants," Economic Analysis (EA) Research Paper Series 2008054e, Statistics Canada, Analytical Studies Branch.
    19. Baldwin, John R. Lileeva, Alla, 2008. "Adaptation à la concurrence des importations : effets du commerce avec les pays à bas salaires sur le portefeuille de produits des établissements manufacturiers canadiens," Série de documents de recherche sur l'analyse économique (AE) 2008054f, Statistics Canada, Direction des études analytiques.
    20. Salvacruz, Joseph C., 1994. "Technological Change And Agricultural Trade Patterns," Journal of Food Distribution Research, Food Distribution Research Society, vol. 25(1), pages 1-6, February.
    21. Lu, Chia-Hui, 2007. "Moving up or moving out? A unified theory of R&D, FDI, and trade," Journal of International Economics, Elsevier, vol. 71(2), pages 324-343, April.
    22. Elhanan Helpman, 1988. "Growth, Technological Progress, and Trade," NBER Working Papers 2592, National Bureau of Economic Research, Inc.

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