Abstract
International trade has long been considered a channel of technology transfer. This paper draws from the World Bank’s Enterprise Surveys to provide a sample of 18 developing and emerging economies to investigate whether global value chains (GVCs) are a vehicle for the transfer of technology. It focuses on one specific channel for technology transfer, namely, the licensing of foreign technology. To control for the possible endogeneity of technology licensing, propensity score matching is combined with a difference-in-differences approach. The results show a positive effect of being involved in two-way trading on the licensing of foreign technology. Firms that become two-way traders are significantly more likely to use foreign-licensed technology than firms starting to export or import. This evidence suggests that the complexity associated with the mode of internationalisation determines the licensing of foreign technology. GVC participation also appears to foster firms’ performance, reflecting my findings that the acquisition of foreign technology leads to significant productivity improvements.
Highlights
Recent decades have witnessed a dramatic change in international trade and production patterns
∗, ∗∗, ∗∗∗ indicate statistical significance at the 10, 5 and 1% levels, respectively use a propensity score matching (PSM) diff-in-diff approach to test whether acquiring a foreign-licensed technology leads to productivity gains
Empirical studies show that trading across borders may bring several advantages to firms in developing countries, for those exporting to advanced economies
Summary
Recent decades have witnessed a dramatic change in international trade and production patterns. A related body of empirical literature using firm-level data shows that GVC participation fosters firms’ performance in developing countries (Gereffi 1999; Pietrobelli and Saliola 2008; Atkin et al 2017; Del Prete et al 2017; Benkovskis et al 2020) My paper extends this literature, illustrating how through foreign licensing, GVC participation generates significant productivity gains in manufacturing firms in developing and emerging economies. Alfaro-Urena et al (2019) find that firms in Costa Rica experienced strong and persistent improvements in performance after starting to supply multinationals My paper complements this literature, suggesting that through foreign licensing multinational enterprises might transfer international technology to their suppliers located in developing countries. Firms in different countries are evaluated in different time periods, with an average time span between the two surveys of 4 years.
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