Bargaining and the distribution of returns in the purchase of technology by developing countries

Abstract

The paper reviewing the bargaining and the distribution of returns in the purchase of technology. Properties of the market of technology transfer are therefore, such that the mechanism that best describes its functioning is the process of bargaining (and not the traditionally defined market-price system). The buyer is, moreover, placed in a position of structural weakness in the formulation of his demand for information. We now have to consider why developing countries confront, in addition, other problems which further diminish their relative bargaining power and hence increase the cost of technology acquisition. Then, briefly treating three general aspects. The process of industrialization through final product import substitution of the "late-late corners" has been such that developing countries basically confine themselves to the transformation (and not properly the production) of products that have been imported from abroad. As a result, purchases of the latter are tied-in with the purchase of technology. Markets where prices are settled through bargaining, like the labor market, have generally developed explicit multinational methods and rules upon which negotiations are settled. The contractual terms by which technology is being sold to developing countries violate the basic principles of anti-monopoly or anti-trust legislation through which developed countries attempt to protect the interests of their national economies. For example, a clause which is most common in technology sales is that of export prohibition.