Foreign Investment, Technology Transfer, and the Technology Gap: A Note

Tamotsu Nakamura

Review of Development Economics, 2002, vol. 6, issue 1, 39-47

Abstract: The paper analyzes a simple differential game model of international technology transfer via foreign direct investment, in which a subsidiary of a multinational corporation and a host‐country firm are engaged in a technology accumulation race. In contrast to previous works, it is shown that an elasticity of the foreign firm’s marginal quasi‐rent plays a key role in determining the effects of technology spillover and of efficiency of learning activities on the technology transfer: those are positive if it is larger than unity in absolute value, and vice versa. Other comparative static results are reported.

Date: 2002
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