Abstract: A Cournot model was used to analyze the relationship between absorptive capability of the developing countries and technology spillovers from MNEs of the development countries. This study reveals two conclusions. Firstly, the technology spillovers ratio increases as absorptive capability increases while absorptive capability of the developing countries is below the threshold value. At the same time, the home firm is willing to spend more money to gain technology spillovers, while the foreign firm is willing to spend less money to prevent technology spillovers. Secondly, while absorptive capability of the developing countries is exceed the threshold value, the technology spillovers ratio is determined by the trade off between the self-innovation and technology imitation, since the home firm has a relatively high level of technology.