Characteristics and determinants of technology transfer to developing countries

This dissertation addresses several aspects associated with the flow of technology from developed to developing countries. After providing the motivation for this research in the first Chapter, we turn to the theoretical underpinnings governing the choice of the mode of technology transfer in Chapter 2. This chapter highlights the importance of two factors—the information structure surrounding the “quality” of the technology being transferred and the cost of marketing the finished product manufactured by the technology—in determining the choice of the equilibrium transfer mode. The choice of a transfer mode is restricted to the set of three available modes—a wholly-owned subsidiary, a joint venture or licensing. The model provides an explanation of why low quality technologies are often licensed out while better technologies are mostly transferred by joint ventures or through the wholly-owned subsidiaries of multinational corporations.; Given the importance of licensing as a predominant contractual mode under which technologies are transferred from developed to developing countries, the next two chapters focus explicitly on issues involving technology licensing. Chapter 3 develops a model of technology licensing incorporating informational distortions and limited enforcement of property rights. It explores the mechanism by which these factors affect the terms of technology licensing contracts and derives predictions about how the contract terms vary as the relative strengths of these factors change.; The predictions from the licensing model developed in Chapter 3 are tested in the empirical exercise in Chapter 4. The exercise is conducted using a dataset of technology licensing contracts involving firms in developed countries (the “licensors”) and firms in India (the “licensees”) from several different industries. We find that lack of property rights and contract enforcement had a relatively stronger impact on the terms of licensing contracts in the Indian context. Although the exercise in this Chapter is based on contracts involving Indian companies, the methodology proposed in this chapter can be applied in multiple contexts given data availability. The results imply potential benefits from tightening the regime of intellectual property protection in India and lends support to the government's recent decision to sign on to the GATT agreement.