We propose an incomplete contract model of licensing of a cost-reducing technolosgu. We incorporate exchange rate uncertaintu and analyze its impact on the parties' investment and licensing decisions. Exchange rate fluctuations introduce a distortion between the licensor and the licensee's value for the technology. We show that the exchange rate uncertaintu introduces a distortion in the parties' specific investment decisions and could prevet the transfer from taking place.
O33, L24, F31
Exchange rate uncertainty and international technology transfer
Keywordstechnology transfer; licensing; exchange rates