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Multinational firms, exclusivity, and backward linkagesJournal of International Economics
Document TypeJournal article
- Backward linkages,
- Multinational firms,
- Vertical technology transfer
AbstractHow 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.
Copyright © 2006 Elsevier B.V.
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Citation InformationLin, 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