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Multinational firms, exclusivity, and backward linkages

In: Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy

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  • Ping Lin
  • Kamal Saggi

Abstract

How does the nature of contractual relationships between a multinational and its local suppliers affect backward linkages and welfare in the local industry? We address this question in a two-tier oligopoly model where a multinational transfers technology to its suppliers if they accept an exclusive contract that precludes them from serving its local rivals. Invited suppliers balance the benefits of gaining access to new technology and the derived demand of the multinational against the opportunity of selling to other local firms. Exclusivity reduces competition among local suppliers and can lower backward linkages and local welfare relative to autarky.

Suggested Citation

  • Ping Lin & Kamal Saggi, 2023. "Multinational firms, exclusivity, and backward linkages," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 8, pages 189-203, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813233027_0008
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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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