‘DAVIDS’ ARE NOT SMALL ‘GOLIATHS’: R&D AND TECHNOLOGY LICENSING IN BRAZILIAN PRODUCTION

Recent liberalization of technology flows in several less developed nations necessitates study into the possible effects of this significant shift in policy. This paper uses a unique firm-level dataset, modeling the choice between R&D expenditures and technology licensing behavior in Brazil, explicitly considering corner solutions using the Kuhn-Tucker conditions. Extending the results found elsewhere in the literature, econometric estimation of simultaneous input demand for capital, labor and both types of technology acquisition reveals that while very small firms see technology licensing and R&D as contemporaneous substitutes, firms of moderate to large size treat them as complements. Each firm's licensing experience also plays a key role in the decision.