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Technology Capital Transfer

Author

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  • Ellen R. McGrattan

    (Federal Reserve Bank of Minneapolis)

  • Edward C. Prescott

    (Arizona State University)

  • Thomas J. Holmes

    (University of Minnesota)

Abstract

It is widely believed that an important factor underlying the rapid growth in China is increased foreign direct investment (FDI) and the transfer of foreign technology capital, which is accumulated know-how from investment in research and development (R\&D), brands, and organizations that is not specific to a plant. In this paper, we study two channels through which FDI can contribute to upgrading of the stock of technology capital: knowledge spillovers and appropriation. Knowledge spillovers lead to new ideas that do not directly compete or devalue the foreign affiliate's stock. Appropriation, on the other hand, implies a redistribution of property rights over patents and trademarks; the gain to domestic companies comes at a loss to the multinational company (MNC). In this paper we build these sources of technology capital transfer into the framework developed by McGrattan and Prescott (2009, 2010) and introduce an endogenously-chosen intensity margin for operating technology capital in order to capture the trade-offs MNCs face when expanding their markets internationally. We show that economic outcomes differ dramatically depending on which channel of technology capital transfer is operative.

Suggested Citation

  • Ellen R. McGrattan & Edward C. Prescott & Thomas J. Holmes, 2011. "Technology Capital Transfer," 2011 Meeting Papers 676, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:676
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    References listed on IDEAS

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    Cited by:

    1. Liu, Qing & Lu, Ruosi & Zhang, Chao, 2014. "Entrepreneurship and spillovers from multinationals: Evidence from Chinese private firms," China Economic Review, Elsevier, vol. 29(C), pages 95-106.

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