Multinational firms, exclusivity, and backward linkages
Document Type
Journal article
Source Publication
Journal of International Economics
Publication Date
3-8-2007
Volume
71
Issue
1
First Page
206
Last Page
220
Keywords
Backward linkages, Exclusivity, Multinational firms, Vertical technology transfer
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.
DOI
10.1016/j.jinteco.2006.02.003
Print ISSN
00221996
E-ISSN
18730353
Publisher Statement
Copyright © 2006 Elsevier B.V.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Lin, 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