| Indian technology policy appears to have been based on the promise that though technology imports are important for growth, it could hinder technological effort in the recipient country. A model with two technology importing firms and a technical input supplying domestic sector competes with technology suppliers in the developed world is analyzed. Domestic purchases convey a beneficial externality on other users so that the resulting market outcome is inefficient. However, absent synergies between technological efforts of users and the learning activities in the domestic technical input sector, restricting technology imports will not encourage domestic technological efforts.; The empirical literature suggests that technological efforts and technology imports are complements. Many of these econometric studies on the subject are found to suffer from methodological problems. A unifying framework and a simple way of testing for complementarities between decision variables using reduced form regressions is provided.; Industrial technologies have important components that are tacit. The transfer of tacit knowledge (as technical services) in licensing contracts is studied using Indian data, using econometric techniques suitable for the analysis of qualitative variables. Surprisingly, measures of the licensee's technological capability do not appear to be significant. By contrast, variables related to the ease with each the licensor and the licensee can contract at arms length for tacit knowledge, such as an agreement on patent rights, have a more significant impact.; If the provision of tacit knowledge is costly to the licensor, and its provision unverifiable by third parties, arms-length contracting is marked by double sided moral hazard. Using a simple principal-agent model, the role of intellectual property rights (which address codified rather than tacit knowledge) in alleviating the problem is investigated. It is shown that arms-length contracting can achieve the first-best provided intellectual property rights are defined broadly enough. The analysis is extended to allow for re-negotiation and asymmetric information. |
