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VERTICAL RESTRAINTS AND TECHNOLOGY TRANSFER: Inter-firm Agreements in Eastern Europe’s Car Component Industry

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  • Lorentzen, Jochen

    (Department of International Economics and Management, Copenhagen Business School)

  • Møllgaard, Peter

    (Department of International Economics and Management, Copenhagen Business School)

Abstract

We test the relationship between exclusive agreements and technology transfer among firms in the automotive supply industry in EU candidate countries. Exclusive agreements come in bundles, are reciprocal and are passed on up- or downstream. The type of exclusivity employed by a firm depends on its position in the supply chain. Downstream firms are more likely to be subject to and/or impose vertical restraints. Technology trickles upstream: Multinational final assemblers transfer a lot of technology; lower-tier suppliers less. Technology transfer is negatively related to the exclusive agreements that should protect it, suggesting a certain incidence of anti- rather than pro-competitive motives. Complementary case studies reveal three possible motives for vertical restraints. Owners of technology protect their intellectual property; recipients of technology protect investments in relation-specific assets; and either or both engage in attempts to increase market power. This has implications for competition policy in an enlarging Europe.

Suggested Citation

  • Lorentzen, Jochen & Møllgaard, Peter, 2000. "VERTICAL RESTRAINTS AND TECHNOLOGY TRANSFER: Inter-firm Agreements in Eastern Europe’s Car Component Industry," Working Papers 9-2000, Copenhagen Business School, Department of International Economics and Management.
    • Handle: RePEc:hhb:cbsint:2000-009
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    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/6574
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    References listed on IDEAS

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    1. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    2. Kaminski, Bartlomiej & Ng, Francis, 2001. "Trade and production fragmentation : Central European economies in European Union networks of production and marketing," Policy Research Working Paper Series 2611, The World Bank.
    3. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, Decembrie.
    4. Jochen Lorentzen & Peter MØllgaard & Matija Rojec, 2003. "Host-country Absorption of Technology: Evidence from Automotive Supply Networks in Eastern Europe," Industry and Innovation, Taylor & Francis Journals, vol. 10(4), pages 415-432.
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    Cited by:

    1. Lin, Ping & Saggi, Kamal, 2004. "Multinational Firms, Exclusivity, and the Degree of Backward Linkages," Kiel Working Papers 1250, Kiel Institute for the World Economy (IfW Kiel).
    2. Alipranti, Maria & Milliou, Chrysovalantou & Petrakis, Emmanuel, 2015. "On vertical relations and the timing of technology adoption," Journal of Economic Behavior & Organization, Elsevier, vol. 120(C), pages 117-129.
    3. Maria Alipranti & Chrysovalantou Miliou & Emmanuel Petrakis, 2014. "On Vertical Relations and Technology Adoption Timing," Working Papers 1502, University of Crete, Department of Economics.
    4. Chrysovalantou Milliou & Apostolis Pavlou, 2013. "Upstream Mergers, Downstream Competition, and R&D Investments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(4), pages 787-809, December.
    5. Lin, Ping & Saggi, Kamal, 2007. "Multinational firms, exclusivity, and backward linkages," Journal of International Economics, Elsevier, vol. 71(1), pages 206-220, March.

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