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International Technology Cooperation: The Problem of Commercial Rivalry



International technology cooperation promises to help countries exploit the potential of new innovations, but commercial rivalry between companies and governments raises obstacles to it. In this article, I present and solve a model of international technology cooperation. The formal analysis shows that a technology agreement must address two issues. First, governments must be able to induce companies to innovate. Second, governments must credibly commit to penalizing companies for failing to share new information produced through research. Based on these observations, I show that the potential for technology cooperation is maximized in symmetric settings between equally capable governments and companies. In practice, this observation warrants a policy focus on countries and industries that are already on a level playing ground. I also consider extensions to multinational companies and adverse selection problems. The formal analysis provides a solid foundation for practical policy implementation.