International competition in R&D and technological leadership. An examination of the Posner-Hufbauer hypothesis

This paper develops a dynamic game-theoretic model of international competition in R&D to examine the Posner-Hufbauer hypothesis that trade based on the generation and diffusion of superior technology is relatively disadvantageous to the technologically less advanced countries. The impact of three forms of technological leadership (technological endowments, costs of R&D, and preemptive behavior) on the outcome of the game provides some support for the hypothesis. If the quasi-rent period is sufficiently long and if the original technological follower reacts aggressively to increased R&D rivalry, the leader and the follower will switch positions in the later part of the game.