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Technology, Licensing and Multinational Production

Author

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  • Sophia Praetorius

Abstract

How flexible are multinational production networks when assembly technologies are specialized and costly to reconfigure? Using data on the global automotive industry from 2000-2023, I document that production is organized around discrete process technologies (platforms) that constrain where each product can be assembled. Exploiting the 2011 Tohoku earthquake as a quasi-natural experiment, I show that platform compatibility limits firms’ ability to reallocate production after local shocks. Firms overcome this constraint by licensing technologies to each other. I develop and estimate a structural model of multinational production with discrete technology choice and inter-firm licensing. Models abstracting from production technologies overstate the reallocation induced by tariffs and understate the price incidence borne by the tariffing country’s consumers. The model also allows to study policies restricting access to technologies: these can trigger more reallocation than a broad tariff war, with costs concentrated on the firms and locations bound by the affected technologies.

Suggested Citation

  • Sophia Praetorius, 2026. "Technology, Licensing and Multinational Production," CESifo Working Paper Series 13089, CESifo.
    • Handle: RePEc:ces:ceswps:_13089
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    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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