Leaders, laggards and technology seeking strategies

We analyze the conditions determining optimal technology seeking strategies for leader and laggard firms. We extend existing theories by differentiating leaders and laggards in terms of absorptive capacity and intra-firm technology transfer skills, next to productivity levels. In addition, both Foreign Direct Investment (FDI) as well as exports function as two alternative technology seeking strategies. Our theoretical results demonstrate that for a wide range of parameter settings, leaders optimally seek technology through FDI, whereas laggards do so through exports. Confronting these findings with some original exploratory industry-level analysis complemented by insights derived from case studies, we find broad overall support for our theoretical predictions.

Highlights
► We model optimal technology seeking strategies of leading and lagging firms in international duopoly. ► We find that laggards optimally engage in exports and leaders in FDI for a wide range of different parameter settings and assumptions. ► Exploratory case studies and some novel econometric analysis support the implications of our model. ► Our results bridge the gap between the established theory in this literature and some recent contrasting empirical evidence.