Research notes · Knowledge

Does forcing a foreign firm to share its technology actually transfer any?

What the authors found

Barwick, Cao, Li and Bai study China's joint-venture requirement in automobiles, under which foreign carmakers had to partner with domestic firms as the price of market access. They find the policy did facilitate knowledge spillovers and quality upgrading among domestic producers — the quid pro quo worked, at least in this industry, which is not the outcome standard arguments about forced technology transfer would predict.

What our data adds

China's position in the priced knowledge trade is striking against the size of its manufacturing base. It receives 13.1 billion dollars a year in charges for the use of intellectual property, well behind the United States at 189.1 billion, Japan at 54.5 and the United Kingdom at 54.4 — an economy that makes a large share of the world's manufactured goods collects a small share of the world's royalties. That is the gap the joint-venture policy was designed to close, and the recorded flows suggest it remains open.

What this cannot show

Royalty receipts measure what is licensed out, not what is known, and a country can absorb technology thoroughly while licensing very little of it abroad. The paper's mechanism is spillover within an industry, which does not generate a cross-border payment and so cannot appear in these lines at all. This is context about China's position in priced technology flows, and it neither supports nor tests the finding.

The data behind it

Related notes

• When cheap imports arrive, do domestic firms innovate their way out or give up?
• Rich countries spend more on research every year. Why is measured productivity growth falling?
• How much of what gets patented rests on publicly funded science?

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