FDI and Technology Spillovers under Vertical Product Di erentiation
When Northern firms undertake FDI in the South, the superior technology they bring to their Southern operations spills over to Southern firms. Technology spillovers accompanied by FDI often enable Southern firms to enhance their product quality. This paper explores a model that incorporates quality-enhancing spillovers in an international duopoly model of vertical product differentiation. We find that the Northern firm, when it chooses to undertake FDI, strategically reduces its product quality to reduce the amount of technology that spills over to the Southern firm. This strategic quality reduction, which is often observed in reality, plays a critical role in welfare consequences and policy implications of quality-enhancing technology spillovers.
|Date of creation:||Mar 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +61)-2- 9313- 6337
Web page: http://www.economics.unsw.edu.au/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eugen Kovac & Kresimir Zigic, 2007.
"International Competition in Vertically Differentiated Markets with Innovation and Imitation: Trade Policy versus Free Trade,"
CERGE-EI Working Papers
wp336, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
- Eugen Kováč & Krešimir Žigić, 2014. "International Competition in Vertically Differentiated Markets with Innovation and Imitation: Trade Policy Versus Free Trade," Economica, London School of Economics and Political Science, vol. 81(323), pages 491-521, 07.
- Glass, Amy Jocelyn & Saggi, Kamal, 1998. "International technology transfer and the technology gap," Journal of Development Economics, Elsevier, vol. 55(2), pages 369-398, April.
- Nicolas Boccard & Xavier Wauthy, 2005.
"Enforcing Domestic Quality Dominance through Quotas,"
Review of International Economics,
Wiley Blackwell, vol. 13(2), pages 250-261, 05.
- BOCCARD, Nicolas & WAUTHY, Xavier, . "Enforcing domestic quality dominance through quotas," CORE Discussion Papers RP -1756, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Herguera, Inigo & Kujal, Praveen & Petrakis, Emmanuel, 2002. "Tariffs, quality reversals and exit in vertically differentiated industries," Journal of International Economics, Elsevier, vol. 58(2), pages 467-492, December.
- Moraga-Gonzalez, Jose Luis & Viaene, Jean-Marie, 2005. "Trade policy and quality leadership in transition economies," European Economic Review, Elsevier, vol. 49(2), pages 359-385, February.
- Zhou, Dongsheng & Spencer, Barbara J. & Vertinsky, Ilan, 2002.
"Strategic trade policy with endogenous choice of quality and asymmetric costs,"
Journal of International Economics,
Elsevier, vol. 56(1), pages 205-232, January.
- Dongsheng Zhou & Barbara J. Spencer & Ilan Vertinsky, 2000. "Strategic Trade Policy with Endogenous Choice of Quality and Asymmetric Costs," NBER Working Papers 7536, National Bureau of Economic Research, Inc.
- Thomas J. Prusa & Reiko Aoki, 1997. "Sequential vs. Simultaneous Choice With Endogenous Quality," Departmental Working Papers 199510, Rutgers University, Department of Economics.
- Alireza Naghavi, 2007.
"Strategic Intellectual Property Rights Policy and North-South Technology Transfer,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 143(1), pages 55-78, April.
- Alireza Naghavi, 2005. "Strategic Intellectual Property Rights Policy and North-South Technology Transfer," Working Papers 2005.18, Fondazione Eni Enrico Mattei.
- Das, Satya P. & Donnenfeld, Shabtai, 1989. "Oligopolistic competition and international trade : Quantity and quality restrictions," Journal of International Economics, Elsevier, vol. 27(3-4), pages 299-318, November.
- Glass, Amy Jocelyn & Saggi, Kamal, 2002.
" Multinational Firms and Technology Transfer,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 104(4), pages 495-513, December.
- Howard Pack & Kamal Saggi, 2006. "Is There a Case for Industrial Policy? A Critical Survey," World Bank Research Observer, World Bank Group, vol. 21(2), pages 267-297.
- Zigic, Kresimir, 1998. "Intellectual property rights violations and spillovers in North-South trade," European Economic Review, Elsevier, vol. 42(9), pages 1779-1799, November.
- Analysis, A Welfare & Das, Satya P. & Donnenfeld, Shabtai, 1987. "Trade policy and its impact on quality of imports," Journal of International Economics, Elsevier, vol. 23(1-2), pages 77-95, August.
- Waldman, Michael, 1996. "Durable Goods Pricing When Quality Matters," The Journal of Business, University of Chicago Press, vol. 69(4), pages 489-510, October.
- Waldman, Michael, 1997. "Eliminating the Market for Secondhand Goods: An Alternative Explanation for Leasing," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 61-92, April.
- Glass, A-J & Saggi, K, 1996.
"Foreign Direct Investment and the Nature of R&D,"
ISER Discussion Paper
0420, Institute of Social and Economic Research, Osaka University.
- Justin P. Johnson & David P. Myatt, 2003.
"Multiproduct Quality Competition: Fighting Brands and Product Line Pruning,"
American Economic Review,
American Economic Association, vol. 93(3), pages 748-774, June.
- David P. Myatt & Justin P. Johnson, 2002. "Multiproduct Quality Competition: Fighting Brands and Product Line Pruning," Economics Series Working Papers 105, University of Oxford, Department of Economics.
- Carluccio, Juan & Fally, Thibault, 2010.
"Multinationals, Technological Incompatibilities, and Spillovers,"
CEPR Discussion Papers
7869, C.E.P.R. Discussion Papers.
- Juan Carluccio & Thibault Fally, 2008. "Multinationals, technological incompatibilities and spillovers," PSE Working Papers halshs-00586040, HAL.
- Naoto Jinji, 2003. "Strategic policy for product R&D with symmetric costs," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 993-1006, November.
- Tsuyoshi Toshimitsu, 2005. "Tariffs, Quality Choice, and Cost Functions: a Foreign Monopoly Case," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 376-384, 05.
- Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
- Belderbos, Rene & Lykogianni, Elissavet & Veugelers, Reinhilde, 2005.
"Strategic R&D Location by Multinational Firms: Spillovers, Technology Sourcing and Competition,"
CEPR Discussion Papers
5060, C.E.P.R. Discussion Papers.
- René Belderbos & Elissavet Lykogianni & Reinhilde Veugelers, 2008. "Strategic R&D Location by Multinational Firms: Spillovers, Technology Sourcing, and Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(3), pages 759-779, 09.
- Heidrun C. Hoppe & Ulrich Lehmann-Grube, 2001. "Second-Mover Advantages in Dynamic Quality Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(3), pages 419-433, 09.
- Reiko Aoki, 2003. "Effect of credible quality investment with Bertrand and Cournot competition," Economic Theory, Springer, vol. 21(2), pages 653-672, 03.
- Zigic, Kresimir, 2000. "Strategic trade policy, intellectual property rights protection, and North-South trade," Journal of Development Economics, Elsevier, vol. 61(1), pages 27-60, February.
When requesting a correction, please mention this item's handle: RePEc:swe:wpaper:2012-19. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gabriele Gratton)
If references are entirely missing, you can add them using this form.