Technology Transfer in Global Value Chains†

Global value chains create opportunities for North -South technology diffusion. This paper studies technology transfer in value chains when contracts are incomplete and input production technologies are imperfectly excludable. It introduces a new taxonomy of value chains based on whether the headquarters firm benefits from imitation of its supplier's technology. In inclusive value chains , where imitation is beneficial , the headquarters firm promotes technology diffusion. But in exclusive value chains headquarters seek to limit supplier imitation. The paper analyzes how this distinction affects the returns to offshoring , the welfare effects of technical change, and the social efficiency of knowledge sharing. ( JEL F14, F23, L14, L24, O33 )