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The Role of Technological Complexity and Absorptive Capacity in Internalization Decision

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  • Arti Grover

Abstract

Technology transfer costs have a profound influence on the firm’s entry mode into a production sharing relationship. To explore this nexus, they associate technological complexity of the off-shored input with the organizational mode of international production sharing by extending the Antràs (2005) model. They modify the Antràs model by proposing that the low-tech input, as qualified within the model, cannot be produced in the low wage south without costly technology transfer. The cost of technology transfer in turn depends on three factors, which are the technological complexity of this input, the absorptive capacity of the host country and the wages of the host country. Theirmodel refines the results obtained in Antràs (2005). [Working Paper No. 153]

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  • Arti Grover, 2010. "The Role of Technological Complexity and Absorptive Capacity in Internalization Decision," Working Papers id:2843, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:2843
    Note: Institutional Papers
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    References listed on IDEAS

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    1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
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    3. Paul Bergin & Robert Feenstra, 2006. "Outsourcing and Volatility," Working Papers 628, University of California, Davis, Department of Economics.
    4. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, March.
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    Cited by:

    1. Alireza Naghavi & Julia Spies & Farid Toubal, 2013. "IPR, Product Complexity and the Organization of Multinational Firms," Working Papers 2013-31, CEPII research center.
    2. Alireza Naghavi & Julia Spies & Farid Toubal, 2015. "Intellectual property rights, product complexity and the organization of multinational firms," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 881-902, August.
    3. Alireza Naghavi & Julia Spies & Farid Toubal, 2011. "International Sourcing, Product Complexity and Intellectual Property Rights," Center for Economic Research (RECent) 067, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".

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    More about this item

    Keywords

    Outsourcing; Foreign Direct Investment; Technology Transfer; Absorptive Capacity;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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