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Implicit protectionism via state enterprises and technology transfer from foreign enterprises
Author(s) -
Haraguchi Junichi,
Matsumura Toshihiro
Publication year - 2020
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12468
Subject(s) - protectionism , private enterprise , public enterprise , production (economics) , industrial organization , technology transfer , business , economics , state (computer science) , international trade , microeconomics , finance , public administration , algorithm , political science , computer science
We formulate a mixed triopoly in which one state enterprise competes with one domestic and one foreign private enterprise. The private enterprise can transfer its technology to the private rival, which reduces the rival’s production cost. We show that if the privatization policy is endogenous, then the foreign firm voluntarily transfers its technology. We also show that the foreign enterprise may strategically raise its local ownership share. These results suggest that the existence of a state enterprise and its potential future privatization serve as an industrial policy that improves the domestic firm’s competitive advantage relative to the foreign enterprise.