ROAD ACCESSIBILITY AND WEALTH IN RURAL BHUTAN: A DIFFERENCE IN DIFFERENCE APPROACH

Abstract

Small firms are qualitatively different than large firms with respect to technology acquisition. As such, liberalization of technology flows in newly industrialized nations may have two potential effects, possibly felt differentially by small firms and large firms. First, technology flows may replace domestic research with cheaper imported foreign research. Second, they may combine with domestic research to improve local economic growth. This paper uses a unique firm-level dataset, modelling the choice between R&D expenditures and technology licensing behaviour in Brazil, explicitly considering corner solutions. Extending the results found elsewhere in the literature, econometric estimation of simultaneous input demand for capital, labor and both types of technology acquisition reveals that while very small firms see technology licensing and R&D as contemporaneous substitutes, firms of moderate to large size treat them as complements. Each firmi¯s licensing experience also plays a key role in the decision.