FDI and quality-enhancing technology spillovers

Hodaka Morita and Xuan Nguyen

International Journal of Industrial Organization, 2021, vol. 79, issue C

Abstract: When Northern firms undertake FDI in the South, their superior technology spills over to Southern firms and enables Southern firms to enhance their product quality. This paper explores quality-enhancing technology spillovers in an international duopoly model of vertical product differentiation. We find that the Northern firm strategically reduces its product quality to limit the amount of technology spillovers upon FDI. The trade-off between the Northern firm’s endogenous product quality choice and technology spillovers—similar to that between R&D and technology spillovers as discussed previously–plays a critical role in welfare consequences and policy implications of quality-enhancing technology spillovers.

Keywords: FDI; Quality-enhancing technology spillovers; Strategic quality reduction; Vertical product differentiation; Welfare (search for similar items in EconPapers)
JEL-codes: F12 F13 L11 L13 L15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:79:y:2021:i:c:s0167718721000801

DOI: 10.1016/j.ijindorg.2021.102787

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