Quid Pro Quo: Technology Capital Transfers for Market Access in China

By Thomas J. Holmes, Ellen R Mcgrattan, Edward C. Prescott. 2015

145 citations recorded by the source corpus.

By the 1970s, quid pro quo policy, which requires multinational firms to transfer technology in return for market access, had become a common practice in many developing countries. While many countries have subsequently liberalized quid pro quo requirements, China continues to follow the policy. In this article, we incorporate quid pro quo policy into a multicountry dynamic general equilibrium model, using microevidence from Chinese patents to motivate key assumptions about the terms of the technology transfer deals and macroevidence on China's inward foreign direct investment (FDI) to estimate key model parameters. We then use the model to quantify the impact of China's quid pro quo policy and show that it has had a significant impact on global innovation and welfare.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/b022451f6d039af6c468158f7ba65f49a645fc11

Citations in the corpus

• Local Protectionism, Market Structure, and Social Welfare: China’s Automobile Market (2017, unknown): “Following the strategy of “exchange-market-for-technology”, or “Quid Pro Quo” (Holmes et al., 2015), Chinese government requires foreign automakers to form joint ventures with domestic automakers in order to set up a production facility.”
• Intermediate input imports and innovations: Evidence from Chinese firms' patent filings (2016, unknown): “Hence, we expect that distortion of R&D data is much severer than patent data.14 Second, China’s patent filing and/or granting abroad is a good alternative because it may reflect more genius innovation, as argued by Holmes et al. (2015).”
• Migrants, Ancestors, and Foreign Investments (2018, unknown): “(3)See McGrattan and Prescott (2010) and Holmes et al. (2015).”