Does technology licensing matter for privatization?

Journal of International Economics, 2004

This paper determines the equilibrium market structure in a mixed international oligopoly, where the state assets are sold at an auction. The model suggests that low greenÞeld costs and low trade costs induce foreign acquisitions. The intuition is that domestic Þrms can then not prevent foreign Þrms from becoming strong competitors and thus, their willingness to pay for the state assets is low. We also Þnd that proÞt shifting from domestic to foreign Þrms generated by National Treatments clauses is partly paid for by the foreign investor in the bidding competition over the state assets.

Japanese Economic Review, 2009

This paper examines two policy instruments, privatization of the domestic public firm and imposition of a tariff on foreign private firms in an international mixed oligopolistic model with asymmetric costs. It first demonstrates that different orders of moves of firms will imply different government decisions on optimal tariff and on privatization policy. Following Hamilton and Slutsky (1990), this paper then uses an extended game to discuss endogenous roles. It indicates that the efficiency gain that highlights the importance of foreign competition is crucial in determining the welfare improving privatization policy. Moreover, the endogenous equilibria are associated with different government decisions on privatization.j ere_477 539..559 JEL Classification Numbers: D43, L13, L33.

Economica, 2005

This paper studies privatization policy in an international oligopoly. The argument that equal treatment of foreign investors will be detrimental to domestic welfare by shifting profits from domestic to foreign firms is shown to be less relevant in privatization auctions than in greenfield FDI models, since these profit shifts are partly paid for by the foreign firms in the bidding competition. Effects of local equity requirements, trade and investment policies are also studied. It is, for instance, shown that small local equity requirements are likely to be beneficial but large ones are counterproductive, by preventing welfare-enhancing foreign acquisitions.

MPRA Paper, 2021

Mixed oligopolies are characterized by the coexistence of private and public enterprises. The literature on mixed oligopolies indicates that, assuming all private firms are identical, the optimal degree of privatization increases with the number of private firms. In other words, the more concentrated the market is, the more the government should privatize public firms. We revisit this problem by introducing cost-heterogeneity among private firms. We show that under the assumption of constant marginal costs, a new entry by a private firm will not reduce the optimal degree of privatization, regardless of the cost differences among private firms. However, under the assumption of increasing marginal costs, we show that a new entry will reduce the optimal degree of privatization when the new entrant is significantly less efficient than the private firms already present. Our results imply that the relationship between competition and privatization polices are more complicated than the literature suggests, and they depend on the cost structure of private firms.

We show the effects of product differentiation and competition on technology licensing by an outside innovator. Both the innovator and the society are better off under royalty licensing compared to auction (or fixed-fee) if the number of potential licensees is sufficiently large, irrespective of Cournot and Bertrand competition. We find that the relationship between product differentiation and the minimum number of potential licensees that is required to make royalty licensing profitable to the innovator is non-monotonic under Cournot competition, while it is positive under Bertrand competition. Hence, there are degrees of product differentiation for which neither the innovator nor the antitrust authority requires information about the type of product market competition while deciding on the licensing contract. It follows from our analysis that the innovator prefers auction plus royalty licensing (or fixed-fee plus royalty) over either royalty licensing or auction.

Economic Modelling, 2011

This paper examines the impact of foreign penetration on privatization in a mixed oligopolistic market. In contrast to the simple framework of single domestic market with foreign entry by entry mode of foreign direct investment (FDI) or exports, our result shows that government should increase the degree of privatization along with increasing proportion of domestic ownership of multinational firms. Furthermore, we show that an increase in domestic ownership of multinational firms raises all domestic private firms' profit and social welfare, while it may either increase or decrease public firm's profit. With the aid of numerical example, intensive competition from private firms in general will enhance the degree of privatization gradually; in particular, the degree of privatization is lower in the presence of multinational firms.

Journal of Public Economic Theory, 2013

Public enterprises have played a very significant contribution to drive innovation. In fact, we found several public enterprises among the firms with the highest levels of R& D or in areas of great economic, technological and social importance. So we can consider them as an instrument of technological policy. The process of privatizations can affect the innovating activity of public enterprises. The privatization introduces changes in the objectives and the management of the former public enterprises, which can have some effect on their innovation behaviour. The evidence for the Spanish case suggests a reduction of the innovating effort following the privatization process and a restructuration of R&D activities.

Journal of Economics, 2013

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.

Entrepreneurial Business and Economics Review

The objective of this article is to explore the impact of a regulatory constraint: the ease of paying taxes, on the likelihood of technology licensing and the subsequent impact on the sales of firms acquiring such licences across 30 countries. Research Design & Methods: In a comparative, longitudinal study design we apply random effects panel logit, and random-effects GLS regression models. The World Bank Enterprise Surveys panel data for Central Europe for 2008 to 2013 is the source data for the analysis. Surveys of firms from 30 countries in Central and Eastern Europe and Central Asia constitute the panel. Findings: Increasing regulatory burden in the form of tax compliance reduces the likelihood of technology licensing. Technology licensing has only modest effects on sales. Foreign ownership of firms increases both the likelihood of technology licensing and revenues. Implications & Recommendations: All manner of political entities, from towns to entire nations, revise their tax policies to woo investment. Our current analysis of the marginal effects suggests that the impact of these improvements is underwhelming. Attracting foreign ownership is recommended to increase technology licensing, sales and competitiveness. Contribution & Value Added: While tax holidays are a common device to woo investment, the interaction of tax regimes with technology licensing, specifically the regulatory burden of preparing and paying taxes, is scarcely studied. It is a gap we strive to fill in this manuscript.

1999

The debates surrounding privatization have generally focused on comparison of the productivity performances of public and private firms in different countries on the bases of quantitative methods. The main purpose of this paper is to draw attention to a very important repercussion of foreign ownership through privatization that is the changing nature of the privatized firms' R&D activities in a strategically very important industrial sector in a developing country. After presenting the case studies conducted in the two most important Turkish telecommunication equipment manufacturing firms with the background of the sector's development history in Turkey, the paper will exhibit the impact of foreign ownership on the nature of firms' R&D activities after privatization as a result of the parent firm's global firm strategy. Finally, it will draw policy implications of such changes for developing countries' technology capability development efforts as well as the countries' technological dependence in a strategically important industry.

Journal of Economic Behavior & Organization, 2003

In technology-based industries, incumbent firm often license their technology to potential competitors. Such a strategy is difficul to explain within traditional models of licensing. This paper extends the literature on licensing by relaxing the assumption of a monopolist technology holder. Competition in the market for technology induces licensing of innovations and incumbent firm may fin it privately profitabl to license although their joint profit may well be higher in the absence of any licensing. A strong testable implication of our model is that the number of licenses per patent holder decreases with the degree of product differentiation.

Uncovering the effects of privatization is difficult, because privatization of a particular firm usually is not an accident. This paper tests the effects of privatization on efficiency, firm productivity and technology choice by using a rich panel data set of privatized cement firms from Turkey. Since all public cement firms were privatized and we have pre and post privatization data for all of them, we are able to avoid the problem of endogeneity associated with sample selection. In addition, panel nature of our data allows us to control for both firm and time specific effects. Our results indicate that privatization has a positive and significant effect on labor productivity and output while it has a negative and significant effect on per unit costs and prices. We also find that privatized firm switches to a more capital-intensive technology as capital and capital labor ratio both increase and employment decreases following privatization. These results provide support for an agenc...

The Manchester School, 2012

We consider the interaction of two countries regarding strategic choices on privatization policy in an international mixed market under an open economy. We demonstrate that the equilibrium degree of privatization depends not only on the relative efficiency of the state-owned enterprise, but also on trade policy. We show that, if the state-owned enterprise is relatively inefficient, the competitive optimal degree of privatization is lower in open competition than in closed competition. We also show that the international competitive equilibrium involves less privatization and a higher tariff, even though they are jointly suboptimal. * Manuscript received 10.6.10; final version received 6.2.12. † We are grateful to three anonymous referees for their careful and constructive comments on an earlier version of this paper. All errors are ours. Lee is grateful for the financial support provided by the Research Foundation of the College of Business Administration, Chonnam National University, Korea (2011) and Chen would like to thank the Shanghai Leading Academic Discipline Project (B101). 1 According to the World Bank Group (2008), 48 developing countries carried out 249 privatization transactions valued at US$104.9 billion in 2006, and 51 developing countries carried out 236 privatization transactions valued at US$132.6 billion in 2007. This result was mostly driven by partial privatizations through initial public offerings.

Economics Letters, 1996