European cartels and technology transfer

Business historians generally agree that European cartels, while proliferating after 1918, favoured the international spread of technology. Moving along similar lines, economist Baumol has argued that big firms sell proprietary technology and cooperate on the technological front with the double fold aim to make a profit and to internalise knowledge spillovers. This article qualifies both claims suggesting a less optimistic view about the effects of the visible hand of international cartels. The history of the rayon industry, a high-tech sector until 1940, shows that cartels tended to inflate the price of borrowed technology and to influence the direction of technology flows. Another important conclusion is that the successful adoption of technology did not necessarily translate into expansion for the receptor firms since the cartel leaders, i.e. the licensors, tended either to retain vital information or to check the growth of the licensees by attaching certain commercial limitations to the sale of know-how.