The Role of the MNC in Technology Diffusion under the Product Cycle

Abstract

This paper introduces the role of multinational corporations (MNC) into the Product Cycle with qualityupgradingmodel and examines how technology diffusion in developing countries is affected through the activities of MNC. We discuss two sides of MNC: first, as conductors of technology from developed into developing countries, and second, as producers who need a certain portion of inputs from both countries, called “local content ratio”, in order to produce goods.
In this model, we show that higher local content ratio of MNC may either decrease technology diffusion into developing countries, or widen wage disparity between both countries. But there was no simultaneous increase in technology diffusion and decline in wage disparity.