This paper examines the impact of intellectual property rights (IPR) enforcement on multinational... more This paper examines the impact of intellectual property rights (IPR) enforcement on multinationals'choice of input suppliers and industry pro…ts in a host economy. The framework consists of suppliers with heterogeneous capabilities who must engage in a relation-speci…c investment to customize intermediate inputs upon a transfer payment by …nal producers. An outsourcing contract with better technologically-endowed suppliers requires a lower transfer and generates a higher surplus. Stronger IPR enforcement leads …rms to self-select into better quality suppliers on average by reducing their outside option. Weak legal institutions instead make it possible for a larger range of suppliers, including the less capable ones, to form partnerships by granting them a larger outside option. A better IPR environment is more likely to harm lagging countries where the technology distribution is characterized by less capable suppliers.
This paper addresses the effects of a stronger patent system in developing countries on the quali... more This paper addresses the effects of a stronger patent system in developing countries on the quality of transferred technology and welfare. We show that a stronger patent system can reduce the quality of licensed technology. The presence of technology licensing may encourage the developing country to adopt a stronger patent system compared to the situation where licensing is not an option.
This paper examines the role of government policy in technology licensing decision. We show that ... more This paper examines the role of government policy in technology licensing decision. We show that both the outside and the inside innovators license a new product (or drastic process innovation) to all potential licensees in the presence of tax/subsidy policies. An implication of our analysis is that a monopolist producer may prefer technology licensing in a homogeneous goods industry. Our results also provide a rationale for franchising to multiple sellers.
This paper studies the role of production mode in determining the effects of an increase in uncer... more This paper studies the role of production mode in determining the effects of an increase in uncertainty on the choice of investment outlay. In a continuous-time model of optimal capital investment with innovative R&D under demand uncertainty, we show that investments in both capital and innovative research decrease with an increase in uncertainty, and that such investments rise with the level of primary demand. Our result sheds light on the mode of production as a source of the negative investment-uncertainty relationship.
Along with the steady pace of RMB internationalization, this paper proposes Taiwan as a potential... more Along with the steady pace of RMB internationalization, this paper proposes Taiwan as a potential candidate to become the next RMB offshore center. We review the main drivers behind Hong Kong's success and set the reasons why Taiwan could follow such steps. First, Taiwan's economic ties with China are substantial both in trade and FDI and they are set to be increasingly supported by the improved political relations across the Strait. Second, the relatively large size of Taiwan's financial system, especially if we consider the enormous pool of savings in its investment and insurance companies, and its well-functioning infrastructure, should provide the necessary elements for an offshore RMB market to develop. Finally, following Hong Kong's experience, we offer some suggestions on possible preconditions for Taiwan to become the next RMB offshore center.
We show that international outsourcing may reduce welfare of the outsourcing country by deterring... more We show that international outsourcing may reduce welfare of the outsourcing country by deterring market-entry, thus showing a new effect which is different from the employment and the quality effects creating negative impacts of outsourcing. Entry deterrence under outsourcing reduces domestic welfare if both the profit extraction and cost saving from outsourcing are sufficiently small.
This paper investigates the optimal management of supply disruptions by a manufacturer who uses o... more This paper investigates the optimal management of supply disruptions by a manufacturer who uses order inflation and/or investments in process reliability when contracting two risk-averse suppliers. We consider that these investments can be subject to moral hazard. Technically we solve a newsvendor optimization problem using a random capacity model of disruption. In such a model, the order size does not affect the average production but impacts the probability of disruption. When investments are verifiable we show that the manufacturer is more inclined to invest in the suppliers' reliability and then refrain from using order inflation when the suppliers' production costs and the cost of disposing of unwanted inputs are large. When investments are not verifiable we show that the order sizes can be used strategically as incentive devises due to the suppliers' sensitivity to payoff dispersion. We show that the manufacturer does not always increase his reliance on order inflation and face less reliable suppliers once we introduce moral hazard. In some instances he induces suppliers to undertake larger investments in reliability by increasing the order size. In other instances he is able to reduce his reliance on order inflation.
This paper analyses procurement from two, risk-averse, suppliers who are responsible for the time... more This paper analyses procurement from two, risk-averse, suppliers who are responsible for the timely delivery of some inputs. Their production is subject to inherent disruptions. We characterize the optimal contracts when suppliers can invest to lower the risk of delays that are costly to the manufacturer. When investment is contractible, we show that issuing asymmetric contracts, whereby the buyer is more heavily dependent on one supplier, is optimal as the cost associated with supply disruptions increases. When investment is not contractible, we show that large orders can be used as an incentive devise. Thus, the strategy consisting of selecting one supplier as a main producer and another as a buffer has further desirable advantages under moral hazard.
This paper characterizes the optimal contracts issued to suppliers when delivery is subject to di... more This paper characterizes the optimal contracts issued to suppliers when delivery is subject to disruptions and when they can invest to reduce such a risk. When investment is contractible dual sourcing is generally optimal because it reduces the risk of disruption. The manufacturer (buyer) either issues symmetric contracts or selects one supplier as a major provider who invests while the buffer supplier does not. An increased reliance on single sourcing or on a major supplier is optimal under moral hazard. Indeed, we show that order consolidation increases the manufacturer's profits because it serves as an incentive device in inducing investment.
This paper examines a foreign technology holder's licensing choices between royalty and fixed-fee... more This paper examines a foreign technology holder's licensing choices between royalty and fixed-fee scheme. We emphasize that foreign licensor chooses the quality of licensed technology when the licensee country does not implement perfect intellectual property protection for licensor's technology. We study quality choice as the foreign licensor's selection for a particular grade of technical skills. We show that fixed fee emerges as the equilibrium licensing scheme when both the transfer of his technology is relatively efficient and the licensee is sufficiently cost competitive in the domestic market, and that royalty licensing prevails otherwise. We further show it need not hold the general belief that welfare in the licensor country unambiguously rise with a stronger patenting system in the licensee country when, in particular, such patenting system in place is sufficiently lax.
It is general belief that firm profit is higher under two-part tariff licensing, while social wel... more It is general belief that firm profit is higher under two-part tariff licensing, while social welfare is greater under fixed-fee licensing. We show that this conclusion need not hold when technology transfer is costly and, in particular, when the quality of licensed technology is endogenously chosen. We demonstrate that both social welfare and firms profit are higher under two-part tariff licensing than they are under fixedfee licensing. We also show that a higher quality of technology is licensed under the two-part tariff scheme than it is under the fixed-fee licensing contract. Our analysis suggests that both firms and society may prefer two-part tariff licensing contract under costly technology transfer. This study presents direct contrast result and contributes, therefore, to the extant literature wherein the transfer of technology is costless. Keywords Licensing • Cost of technology transfer • Quality of technology • Welfare JEL Classification L13 • L24 • L40 • H25 • D43
By focusing on the role of intellectual property rights (IPRs), this paper contributes to the lit... more By focusing on the role of intellectual property rights (IPRs), this paper contributes to the literature on determinants of skilled-unskilled wage inequality. We use a two-sector general equilibrium model of a small open economy that produces a normal and an innovation good. We show that in the presence of cross-border differences in IPRs and consequent mobility of skilled labour, the impact of IPRs on skilled-unskilled wage inequality can be broken down into a revenue effect and an output effect. We find that a stronger IPRs regime in the source country reduces its skilled-unskilled wage inequality. However, if the output effect is stronger than the revenue effect, an increase in the recipient country's IPRs protection can contribute to an increase in wage inequality in the source country. Our results confirm the importance of institutional factors, such as the IPRs protection, in addressing the skilled-unskilled wage inequality.
Algebraic complexes whose "faces" are indexed by partitions and plane partitions are introduced, ... more Algebraic complexes whose "faces" are indexed by partitions and plane partitions are introduced, and their homology is proven to be concentrated in even dimensions with homology basis indexed by fixed points of an involution, thereby explaining topologically two quite important instances of Stembridge's q = −1 phenomenon. A more general framework of invariant and coinvariant complexes with coefficients taken mod 2 is developed, and as a part of this story an analogous topological result for necklaces is conjectured. Résumé Complexes algébriques dont les "faces" sont indexées par des partitions et des partitions planes sont introduits. Il est démontré que leur homologie est concentrée en dimensions paires, avec base de homologie indexée par des points fixes d'une involution. Ce résultat explique d'une manière topologique deux instances du phénomène q = −1 du a Stembridge. De plus, un cadre plus général des complexes invariants et coinvariants dont les coefficients sont pris modulo 2 est développé. Comme part de cette histoire, nous conjecturons un résultat analogue pour des colliers.
Thc success of China's approach to transition has produced many challenges to the conventiorial w... more Thc success of China's approach to transition has produced many challenges to the conventiorial wisdom in economic theory. The transition in essence is a process of institutional changes from those of a planned economy to those of a market economy. In the paper we argue that the economic institutions of the planned economy are endogenously shaped t)y the adoption of a comparative advantage-defylng (hereafter CAD strategy) heavyindustry-oriented development strategy in a capital scarce economy. I t is, hence, suggested the completion of China's transition to a market economy, which requires the elimination of institutional distortions in the planned economy, depends on final resolution of viability issue of enterprises in CADS priorlty sectors.
This paper examines the impact of intellectual property rights (IPR) enforcement on multinational... more This paper examines the impact of intellectual property rights (IPR) enforcement on multinationals'choice of input suppliers and industry pro…ts in a host economy. The framework consists of suppliers with heterogeneous capabilities who must engage in a relation-speci…c investment to customize intermediate inputs upon a transfer payment by …nal producers. An outsourcing contract with better technologically-endowed suppliers requires a lower transfer and generates a higher surplus. Stronger IPR enforcement leads …rms to self-select into better quality suppliers on average by reducing their outside option. Weak legal institutions instead make it possible for a larger range of suppliers, including the less capable ones, to form partnerships by granting them a larger outside option. A better IPR environment is more likely to harm lagging countries where the technology distribution is characterized by less capable suppliers.
This paper addresses the effects of a stronger patent system in developing countries on the quali... more This paper addresses the effects of a stronger patent system in developing countries on the quality of transferred technology and welfare. We show that a stronger patent system can reduce the quality of licensed technology. The presence of technology licensing may encourage the developing country to adopt a stronger patent system compared to the situation where licensing is not an option.
This paper examines the role of government policy in technology licensing decision. We show that ... more This paper examines the role of government policy in technology licensing decision. We show that both the outside and the inside innovators license a new product (or drastic process innovation) to all potential licensees in the presence of tax/subsidy policies. An implication of our analysis is that a monopolist producer may prefer technology licensing in a homogeneous goods industry. Our results also provide a rationale for franchising to multiple sellers.
This paper studies the role of production mode in determining the effects of an increase in uncer... more This paper studies the role of production mode in determining the effects of an increase in uncertainty on the choice of investment outlay. In a continuous-time model of optimal capital investment with innovative R&D under demand uncertainty, we show that investments in both capital and innovative research decrease with an increase in uncertainty, and that such investments rise with the level of primary demand. Our result sheds light on the mode of production as a source of the negative investment-uncertainty relationship.
Along with the steady pace of RMB internationalization, this paper proposes Taiwan as a potential... more Along with the steady pace of RMB internationalization, this paper proposes Taiwan as a potential candidate to become the next RMB offshore center. We review the main drivers behind Hong Kong's success and set the reasons why Taiwan could follow such steps. First, Taiwan's economic ties with China are substantial both in trade and FDI and they are set to be increasingly supported by the improved political relations across the Strait. Second, the relatively large size of Taiwan's financial system, especially if we consider the enormous pool of savings in its investment and insurance companies, and its well-functioning infrastructure, should provide the necessary elements for an offshore RMB market to develop. Finally, following Hong Kong's experience, we offer some suggestions on possible preconditions for Taiwan to become the next RMB offshore center.
We show that international outsourcing may reduce welfare of the outsourcing country by deterring... more We show that international outsourcing may reduce welfare of the outsourcing country by deterring market-entry, thus showing a new effect which is different from the employment and the quality effects creating negative impacts of outsourcing. Entry deterrence under outsourcing reduces domestic welfare if both the profit extraction and cost saving from outsourcing are sufficiently small.
This paper investigates the optimal management of supply disruptions by a manufacturer who uses o... more This paper investigates the optimal management of supply disruptions by a manufacturer who uses order inflation and/or investments in process reliability when contracting two risk-averse suppliers. We consider that these investments can be subject to moral hazard. Technically we solve a newsvendor optimization problem using a random capacity model of disruption. In such a model, the order size does not affect the average production but impacts the probability of disruption. When investments are verifiable we show that the manufacturer is more inclined to invest in the suppliers' reliability and then refrain from using order inflation when the suppliers' production costs and the cost of disposing of unwanted inputs are large. When investments are not verifiable we show that the order sizes can be used strategically as incentive devises due to the suppliers' sensitivity to payoff dispersion. We show that the manufacturer does not always increase his reliance on order inflation and face less reliable suppliers once we introduce moral hazard. In some instances he induces suppliers to undertake larger investments in reliability by increasing the order size. In other instances he is able to reduce his reliance on order inflation.
This paper analyses procurement from two, risk-averse, suppliers who are responsible for the time... more This paper analyses procurement from two, risk-averse, suppliers who are responsible for the timely delivery of some inputs. Their production is subject to inherent disruptions. We characterize the optimal contracts when suppliers can invest to lower the risk of delays that are costly to the manufacturer. When investment is contractible, we show that issuing asymmetric contracts, whereby the buyer is more heavily dependent on one supplier, is optimal as the cost associated with supply disruptions increases. When investment is not contractible, we show that large orders can be used as an incentive devise. Thus, the strategy consisting of selecting one supplier as a main producer and another as a buffer has further desirable advantages under moral hazard.
This paper characterizes the optimal contracts issued to suppliers when delivery is subject to di... more This paper characterizes the optimal contracts issued to suppliers when delivery is subject to disruptions and when they can invest to reduce such a risk. When investment is contractible dual sourcing is generally optimal because it reduces the risk of disruption. The manufacturer (buyer) either issues symmetric contracts or selects one supplier as a major provider who invests while the buffer supplier does not. An increased reliance on single sourcing or on a major supplier is optimal under moral hazard. Indeed, we show that order consolidation increases the manufacturer's profits because it serves as an incentive device in inducing investment.
This paper examines a foreign technology holder's licensing choices between royalty and fixed-fee... more This paper examines a foreign technology holder's licensing choices between royalty and fixed-fee scheme. We emphasize that foreign licensor chooses the quality of licensed technology when the licensee country does not implement perfect intellectual property protection for licensor's technology. We study quality choice as the foreign licensor's selection for a particular grade of technical skills. We show that fixed fee emerges as the equilibrium licensing scheme when both the transfer of his technology is relatively efficient and the licensee is sufficiently cost competitive in the domestic market, and that royalty licensing prevails otherwise. We further show it need not hold the general belief that welfare in the licensor country unambiguously rise with a stronger patenting system in the licensee country when, in particular, such patenting system in place is sufficiently lax.
It is general belief that firm profit is higher under two-part tariff licensing, while social wel... more It is general belief that firm profit is higher under two-part tariff licensing, while social welfare is greater under fixed-fee licensing. We show that this conclusion need not hold when technology transfer is costly and, in particular, when the quality of licensed technology is endogenously chosen. We demonstrate that both social welfare and firms profit are higher under two-part tariff licensing than they are under fixedfee licensing. We also show that a higher quality of technology is licensed under the two-part tariff scheme than it is under the fixed-fee licensing contract. Our analysis suggests that both firms and society may prefer two-part tariff licensing contract under costly technology transfer. This study presents direct contrast result and contributes, therefore, to the extant literature wherein the transfer of technology is costless. Keywords Licensing • Cost of technology transfer • Quality of technology • Welfare JEL Classification L13 • L24 • L40 • H25 • D43
By focusing on the role of intellectual property rights (IPRs), this paper contributes to the lit... more By focusing on the role of intellectual property rights (IPRs), this paper contributes to the literature on determinants of skilled-unskilled wage inequality. We use a two-sector general equilibrium model of a small open economy that produces a normal and an innovation good. We show that in the presence of cross-border differences in IPRs and consequent mobility of skilled labour, the impact of IPRs on skilled-unskilled wage inequality can be broken down into a revenue effect and an output effect. We find that a stronger IPRs regime in the source country reduces its skilled-unskilled wage inequality. However, if the output effect is stronger than the revenue effect, an increase in the recipient country's IPRs protection can contribute to an increase in wage inequality in the source country. Our results confirm the importance of institutional factors, such as the IPRs protection, in addressing the skilled-unskilled wage inequality.
Algebraic complexes whose "faces" are indexed by partitions and plane partitions are introduced, ... more Algebraic complexes whose "faces" are indexed by partitions and plane partitions are introduced, and their homology is proven to be concentrated in even dimensions with homology basis indexed by fixed points of an involution, thereby explaining topologically two quite important instances of Stembridge's q = −1 phenomenon. A more general framework of invariant and coinvariant complexes with coefficients taken mod 2 is developed, and as a part of this story an analogous topological result for necklaces is conjectured. Résumé Complexes algébriques dont les "faces" sont indexées par des partitions et des partitions planes sont introduits. Il est démontré que leur homologie est concentrée en dimensions paires, avec base de homologie indexée par des points fixes d'une involution. Ce résultat explique d'une manière topologique deux instances du phénomène q = −1 du a Stembridge. De plus, un cadre plus général des complexes invariants et coinvariants dont les coefficients sont pris modulo 2 est développé. Comme part de cette histoire, nous conjecturons un résultat analogue pour des colliers.
Thc success of China's approach to transition has produced many challenges to the conventiorial w... more Thc success of China's approach to transition has produced many challenges to the conventiorial wisdom in economic theory. The transition in essence is a process of institutional changes from those of a planned economy to those of a market economy. In the paper we argue that the economic institutions of the planned economy are endogenously shaped t)y the adoption of a comparative advantage-defylng (hereafter CAD strategy) heavyindustry-oriented development strategy in a capital scarce economy. I t is, hence, suggested the completion of China's transition to a market economy, which requires the elimination of institutional distortions in the planned economy, depends on final resolution of viability issue of enterprises in CADS priorlty sectors.
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