| Summary: | 博士 === 中國文化大學 === 經濟學研究所 === 97 === This thesis sets up two theoretical models to illustrate how market size and efficiency loss in foreign market affect a firm’s choice of technology. We follow Krugman(1981) and assume that final goods markets are monopolistically competitive. There are two technologies: a high-end technology and a low-end technology. The high-end technology involves a larger fixed cost and a lower variable cost, while the low technology involves a lower fixed cost and a higher variable cost. To use the high-end technology in a foreign market, a firm incurs an efficiency loss which is reflected in a higher fixed cost in the foreign market than in the domestic market. We find out that there exists a critical value of efficiency loss below which firms will adopt high-end technology in the foreign market. The size of the foreign market also plays a role in technological choice. The critical value of efficiency loss in a large foreign market is higher than in a small foreign market so that it will be easier for domestic firms to adopt high- end technology in the foreign market.
In addition, we also analyze the effect of government policy on technology choice: a subsidy on the development of high technology makes it easier for domestic firms to adopt the high-end technology in domestic market; however, it cannot stop a firm from adopting the high-end technology in a foreign market. A penalty tax on adopting the high-end technology in a foreign market is more efficient than the profit tax in stopping firms from using high technology in a foreign market.
Additionally, in a closed economy, we find out the firms of less productivity tend to choose the low-end technology, while the firms of more productivity tend to choose the high-end technology. On the other hand, in an open economy, there exist three critical values of productivity. It follows that the firm with productivity below the first critical value (the lowerest one) will not choose to enter the market. The firm with productivity between the first and the second critical value will adopt the low- end technology in both markets. In addition, the firm with more productivity, between the second and the third critical value, will choose high-end technology in domestic market only when the efficiency loss is higher and in the foreign market only when the efficiency loss is lower. The last implication follows from the fact that the high-end productivity firm, with productivity higher than the third critical value (the greatest one), will choose the high-end technology in both markets. However, when the foreign market size enlarges, it is more likely for a firm to adopt the high-end technology; meanwhile, with a general equilibrium analysis, the level of domestic wage will be relatively decreased.
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