Multinational firms, exclusivity, and backward linkages

Ping LIN, Kamal SAGGI

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

40 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 languageEnglish
Pages (from-to)206-220
Number of pages15
JournalJournal of International Economics
Volume71
Issue number1
DOIs
Publication statusPublished - 8 Mar 2007

Fingerprint

Exclusivity
Backward linkages
Multinational firms
Multinationals
Suppliers
Local suppliers
Oligopoly
Exclusive contracts
Technology transfer
Industry

Keywords

  • Backward linkages
  • Exclusivity
  • Multinational firms
  • Vertical technology transfer

Cite this

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Multinational firms, exclusivity, and backward linkages. / LIN, Ping; SAGGI, Kamal.

In: Journal of International Economics, Vol. 71, No. 1, 08.03.2007, p. 206-220.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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AU - SAGGI, Kamal

PY - 2007/3/8

Y1 - 2007/3/8

N2 - 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.

AB - 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.

KW - Backward linkages

KW - Exclusivity

KW - Multinational firms

KW - Vertical technology transfer

UR - http://commons.ln.edu.hk/sw_master/2339

U2 - 10.1016/j.jinteco.2006.02.003

DO - 10.1016/j.jinteco.2006.02.003

M3 - Journal Article (refereed)

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