Preservation of trade secrets and multinational wage premia

Dan Bernhardt, Vladimir Dvoracek

Research output: Contribution to journalArticlepeer-review

Abstract

This paper considers the strategic behavior of a multinational firm with superior technology operating in a developing country. Domestic firms do not have access to the superior technology other than by hiring away multinational corporation (MNC) workers. The MNC can retain its workers by paying a wage premia, and we determine how the industry structure and the nature of strategic competition between firms affects the MNC's incentive to pay this premia and thus preserve its informational advantage. We characterize conditions under which MNCs inefficiently divide job tasks in order to raise the cost to domestic firms of acquiring the MNC's trade secrets.

Original languageEnglish (US)
Pages (from-to)726-738
Number of pages13
JournalEconomic Inquiry
Volume47
Issue number4
DOIs
StatePublished - Oct 2009

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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