Abstract
This paper analyzes a model in which a firm endowed with a new technology can choose between exports, licensing and direct investment as entry modes in a foreign market. I endogenize the vintage of the transferred technology and allow for imitation by the licensee. Subsidiary production and exports circumvent imitation but involve higher costs for the innovating firm. The firm can strategically use the vintage of the technology to deter imitation by the licensee. As a result, transfers to affiliates might be of later vintage than technologies sold to outsiders. Through modification of the imitation costs, the host country's system of patent protection influences the mode of technology transfers which in turn affects the welfare of the recipient economy.
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