Multinational firms, exclusivity, and backward linkages

Ping LIN; Kamal SAGGI

doi:10.1016/j.jinteco.2006.02.003

Multinational firms, exclusivity, and backward linkages

Ping LIN, Kamal SAGGI

Department of Economics

Research output: Journal Publications › Journal Article (refereed) › peer-review

66 Citations (Scopus)

Abstract

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.

Original language	English
Pages (from-to)	206-220
Number of pages	15
Journal	Journal of International Economics
Volume	71
Issue number	1
DOIs	https://doi.org/10.1016/j.jinteco.2006.02.003
Publication status	Published - 8 Mar 2007

Funding

We thank two anonymous referees, Jonathan Eaton, Taiji Furusawa, Jörn Kleinert, Jim Markusen, Larry Qiu, Santanu Roy, and participants at Kiel Institute's Conference on Multinationals and International Integration (Oct. 2004), at Kobe University's Conference on New Dimensions in International Trade: Outsourcing, Cross-border Merger and Culture (Dec. 2004), and at SMU's Economics Department's Faculty Symposium (Dec. 2004) for helpful comments.

Keywords

Backward linkages
Exclusivity
Multinational firms
Vertical technology transfer

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10.1016/j.jinteco.2006.02.003

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Multinational firms, exclusivity, and backward linkages

Abstract

Funding

Keywords

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Multinational firms, exclusivity, and backward linkages

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