ABSTRACT
Economists have been struggling to clarify their thinking about the relation of technology to international trade. In attempting to find the links between technology and trade in developing countries, analysts have had first of all to develop some understanding of how such countries acquire their technological capabilities. In developing countries, the markets for inputs that are required for the use of disembodied technology, including capital, labor and materials, are commonly inefficient. Foreign partners in an arm’s-length agreement will wish to levy the full costs of policing and enforcing the licensing agreement, such as the costs of ensuring that the licensee limits its use of the technology to prescribed products and prescribed markets. There is a basis for assuming that the foreign trade patterns generated by wholly owned subsidiaries will differ from those of joint ventures and licensees.
