Managerial Incentives for Technology Transfer

Abstract

This paper studies how a separation of ownership and management affects a firm’s incentives to transfer knowledge about technology to a rival in a Cournot duopoly. We consider a three-stage strategic delegation game, where there are two technologies available; one with increasing returns to scale and the other with constant returns to scale. Whilst the former is known to both firms, only the more advanced firm has initially access to the latter type of technology. This firm is assumed to be managerial, not only with respect to product market decisions, but also regarding the choice of whether or not to transfer technology to the rival firm. We show that strategic management will not necessarily affect the decision to transfer technology to a rival, but we identify conditions under which it changes the technology choice of the managerial firm. Welfare implications of this are considered.