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


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.

Keywords: international oligopoly, R&D, licensing, rent-shifting
JEL Classification: F13

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