Technology, Licensing and Multinational Production

Sophia Praetorius

No 13089, CESifo Working Paper Series from CESifo

Abstract: How flexible are multinational production networks when assembly technologies are specialized and costly to reconfigure? Using data on the global automotive industry from 2000-2023, I document that production is organized around discrete process technologies (platforms) that constrain where each product can be assembled. Exploiting the 2011 Tohoku earthquake as a quasi-natural experiment, I show that platform compatibility limits firms’ ability to reallocate production after local shocks. Firms overcome this constraint by licensing technologies to each other. I develop and estimate a structural model of multinational production with discrete technology choice and inter-firm licensing. Models abstracting from production technologies overstate the reallocation induced by tariffs and understate the price incidence borne by the tariffing country’s consumers. The model also allows to study policies restricting access to technologies: these can trigger more reallocation than a broad tariff war, with costs concentrated on the firms and locations bound by the affected technologies.

Keywords: multinational production; intern. trade; technology licensing; FDI; trade policy (search for similar items in EconPapers)
JEL-codes: F12 F23 L14 L21 L24 L62 (search for similar items in EconPapers)
Date: 2026
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