Technology policies, technology transfer by multinational enterprises and R&D activities in LDCs

A simple game theoretic model is developed to study the interaction between the multinational enterprise's (MNE's) technology transfer and the domestic firm's R&D intensity in an LDC. The implications of two technology policies are studied. Two results are derived under certain plausible conditions. First, the subsidy on the MNE's technology transfer may decrease the domestic firm's R&D. Second, the subsidy on the domestic firm's R&D may decrease the technology level transferred by the MNE to the host country. Welfare implications on domestic consumers and producers are also derived. Copyright Kluwer Academic Publishers 1994