Essays on international R and D rivalry, strategic licensing, and the multinational firm.

Three related essays in international production and trade are dealt with. The first essay, "On the feasibility of Strategic Licensing", deals with the relationship between international R and D rivalry and diffusion. Innovation incentives reflecting the existence of rivalry and technological uncertainty shape the resolution of R and D competition and market structure. This analysis sheds some new light on the validity of the persistence of monopoly hypothesis and the effectiveness of strategic licensing in deterring the rival's innovation efforts. By considering how the possibility of diffusion (licensing) affects the innovation efforts, it integrates innovation and diffusion which have been separately dealt with in the literature. It concurrently reconsiders the Posner-Hufbauer hypothesis and investigates the effects of interventionist industrial policy on innovation. The second essay, "A Theory of the Multinational Firm", develops a theory of the multinational firm based on the theory of vertical integration. Unlike other multinational firm theories, it endogenizes transaction costs and relates the incentives to avoid the transaction costs to the emergence of multinationals. If the transaction-specific relationship is exclusive and the c and idate foreign subsidiary has private information, transaction costs are incurred when the multinational tries to establish incentive contracts with the subsidiary. The second essay also demonstrates why multinationalization is a better way of expediting technology transfer and what effects it has on the factor rewards. The third essay, "International R and D Rivalry with Spillovers", examines the question of whether the strategic trade policy argument for intervening the international output market can be directly extended to the area of international R and D rivalry. Explicit consideration of spillover effects as well as the fixed-cost characteristic of R and D investment is essential to assessing the need for the positive R and D subsidy. In the area of R and D competition, the profit-shifting argument for intervention is not robust against uncertainty, domestic rivalry, and spillovers. These factors have impact on the desirability of strategic policy intervention, since they will modify the effects of intervention on the behavior of both foreign and domestic firms.PhDEconomic theoryUniversity of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/162077/1/8907079.pd