Divide and conquer: industry market structure, inter-firm rivalry, and bargaining over technology

When do firms trade technology for market access? Theories of foreign investment typically frame host state bargaining power in terms of domestic characteristics like market size. This article examines how the structure of global markets in which firms are embedded and the inter-firm competition this generates shape firm-state bargaining over technology in ways not reducible to host state attributes. I argue that as the number of firms in an industry rises and global market shares become less evenly divided among them, weak market players face strong incentives to transfer technology in return for access to new markets. In this context, host states can “divide and conquer” investors to secure better terms of trade and investment. Case studies of technology transfer in commercial aircraft manufacturing and semiconductor design and fabrication in China show how industry market structure shapes firm-state bargaining over entry terms both across and within industries.