Costless technology transfer is a standard assumption in the international trade literature, however by some estimates the average technology transfer cost is nearly 20% of total project costs (Teece, 1977). This analysis examines the conditions under which the advanced country gains when the transfer of technology from the advanced North to the less advanced South incurs resource costs. Results are derived for the effect on production, wages, prices and welfare of lower transmission and absorption costs, and productivity and population shocks. The framework is extended to examine the implications of an improvement in the enforcement of international intellectual property rights.