INTERNATIONAL TECHNOLOGY-TRANSFER UNDER POTENTIAL THREAT OF ENTRY - ACOURNOT-NASH FRAMEWORK

This paper analyses the possibility of technology transfer from a tech nologically advanced foreign firm to a domestic firm of a less-develop ed country when the product market is characterized by Cournot-Nash co mpetition. The foreign firm is not allowed to enter the home market by a prohibitive tariff but the backward firm may not face any such resi stance in the foreign markets. This means that technology transfer, un der this situation, involves potential threat of competition from the latecomer. It is shown that by designing a suitable payment policy the host-country government can induce the foreign firm to transfer the ' best' technology. However, there are possible equilibria where 'worse- than-the-best' technologies are transferred.