Working Paper: CEPR ID: DP16943
Authors: Thomas Sampson
Abstract: Firm-to-firm relationships in global value chains create opportunities for North-South technology diffusion. This paper studies technology transfer in value chains when contracts are incomplete and input production technologies are imperfectly excludable. The paper introduces a new taxonomy of value chains based on whether or not the headquarters firm benefits from imitation of its supplier's technology. In inclusive value chains, where imitation is beneficial, the headquarters firm promotes technology diffusion. By contrast, in exclusive value chains headquarters seeks to limit supplier imitation. The paper analyzes how this distinction affects the returns to offshoring, the welfare effects of technical change and the social efficiency of knowledge sharing. Weaker intellectual property rights over input production technologies raise welfare when value chains are inclusive, but have the opposite effect under exclusive value chains.
Keywords: technology transfer; global value chains; incomplete contracts; intellectual property rights; imitation
JEL Codes: D23; F10; F23; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Inclusive value chains (O36) | technology diffusion (O33) |
| Inclusive value chains (O36) | production surplus (E23) |
| Lower imitation costs (L15) | real wages in inclusive value chains (D46) |
| Exclusive value chains (L14) | limit supplier imitation (D43) |
| limit supplier imitation (D43) | decrease in production surplus (E23) |
| weaker intellectual property rights (O34) | reduce welfare in exclusive value chains (D69) |
| imitation risk (L15) | headquarters firm's expected profits (L21) |
| imitation risk (L15) | loss of profit at production stage (D24) |
| imitation risk (L15) | alleviation of holdup inefficiencies (D86) |
| imitation risk (L15) | changes in investment incentives for technology transfer (O38) |
| optimal intellectual property policy (O34) | structure of value chains (D46) |