Strategic licensing, exports, FDI, and host country welfare

Uday Sinha

Oxford Economic Papers, 2010, vol. 62, issue 1, 114-131

Abstract: This paper analyses the preference of a foreign firm over serving a host country market and its impact on the host country welfare. We show that the foreign firm can choose licensing its superior technology to a host firm strategically which influences the foreign firm's subsequent preference over exporting and FDI. The effect on the host country welfare depends on the structure of license fee and it is shown that strategic licensing might lead to welfare loss for the host country. To this end this paper also prescribes either an optimal tariff scheme or a ban on licensing to maximize the host country welfare. Copyright 2010 Oxford University Press 2009 All rights reserved, Oxford University Press.

Date: 2010
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