Abstract

The acquisition of technology through licenses is a potentially important means of accelerating productivity growth, especially in "late starter" developing countries in the throes of "catch-up." Yet the literature has tended to focus on the potential benefits to the seller, overlooking those to the purchaser (our own concern). We find that expenditures on licensing showed exceptionally high rates on return, on the order of twice those for investment in physical capital. This investment significantly improved firms' performance and productivity in Chilean industry during the 1990s. We conclude that licensing can be an important instrument for speeding catch-up in less-developed countries. © 2002 Elsevier Science Ltd. All rights reserved.