Technology Transfer, Contracting, and Product Market Competition

Frago Kourandi, Sabina Sachtachtinskagia and Nikolaos Vettas ()

Chapter 10 in The Analysis of Competition Policy and Sectoral Regulation, 2014, pp 231-275 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We examine aspects of how new technology may be transferred to firms that use it in a final product market. Should technology transfer take place to a single firm or to more than one, and should it happen gradually or at once? How do the incompleteness of contracts and the nature of product market competition affect the transfer of technology? Such issues are central in the challenges that multinationals face when they need to transfer technology to local firms. First, we review the main related ideas in the literature. Second, we set up a simple model of gradual transfer of a cost-reducing innovation by its owner to the product market. We illustrate why, in the absence of vertical integration and complete contracts, technology transfer tends to be slower and at a lower than the optimal level and discuss the crucial role of potential competition in determining the level and allocation of profits between the upstream and the downstream firms.

Keywords: Competition Policy; Sectoral Regulation; Pattern Asymmetry; Market Consolidation; Grocery Retailing; Pricing Developments; Industry Structure; Price Effects of Mergers; Input Price Shocks; Quantity Discounts (search for similar items in EconPapers)
Date: 2014
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