Title

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.

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Full-text Version

Publisher’s Version

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