Hold-ups and Asymmetric Information in a Technology Transfer: the Micronas Case

In 1980 three Finnish companies established a research joint venture as a separate firm in order to develop semiconductors. We study the initial stages of the project focusing on the two evident sources of difficulty associated with an international technology transfer. One is a hold-up problem and the other asymmetric information on the quality of the technology. We develop two simple models that capture some features of the contract governing the technology transfer, and conclude that both problems were present, but hold-up problems were considered a more serious threat.