Title

International Rent-shifting under Foreign Entry through R&D and Licensing

Abstract

We explore international rent-shifting when a domestic firm and a foreign rival compete in the domestic market. To serve the market, the foreign firm has to acquire a production technology through either R&D or licensing obtained from the domestic firm. In the presence of both R&D and licensing, the domestic firm deters the foreign firm from engaging itself in R&D. Then the foreign government can shift the rent from the domestic firm either directly or indirectly. However, such rent-shifting opportunities may be deterred by the domestic government. The shifted rent could exceed the amount paid by the foreign firm for licensing.

Jota ISHIKAWA
Hitotsubashi University, and RIETI

Toshihiro OKUBO
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059