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Multinational firms, exclusivity, and backward linkages
Journal of International Economics
  • Ping LIN, Lingnan University, Hong Kong
  • Kamal SAGGI, Southern Methodist University, United States
Document Type
Journal article
Publication Date
  • Backward linkages,
  • Exclusivity,
  • Multinational firms,
  • Vertical technology transfer

How does the nature of contractual relationships between a multinational and its local suppliers affect backward linkages and welfare in the local industry? We address this question in a two-tier oligopoly model where a multinational transfers technology to its suppliers if they accept an exclusive contract that precludes them from serving its local rivals. Invited suppliers balance the benefits of gaining access to new technology and the derived demand of the multinational against the opportunity of selling to other local firms. Exclusivity reduces competition among local suppliers and can lower backward linkages and local welfare relative to autarky.

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Copyright © 2006 Elsevier B.V.

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Citation Information
Lin, P., & Saggi, K. (2007). Multinational firms, exclusivity, and backward linkages. Journal of International Economics, 71(1), 206-220. doi:10.1016/j.jinteco.2006.02.003