WHY IS THE TECHNOLOGY CONTRIBUTION OF MULTINATIONALS POTENTIALLY SO IMPORTANT FOR DEVELOPING COUNTRIES? WHAT FACTORS WILL DETERMINE WHETHER OR NOT THE TRANSFERED TECHNOLOGY ACTUALLY PROVIDES NET BENEFITS FOR THE HOST DEVELOPING COUNTRY?
“Today’s apple is broken no best by credo but by technology… 15% of the earth’s population, provides about all of the world’s technology innovations…half of the world’s population, is able to accept these technologies in assembly and consumption. The actual part, accoutrement about a third of the world’s population, is technologically disconnected, neither innovating at home nor adopting adopted technologies.” Sachs (2000)
According to the new Advance approach of the 1990’s, “Innovation is the prime antecedent of abstruse advancement…which in about-face drives bread-and-butter growth”. One of the prime motives of host developing countries for broadly accepting and auspicious assorted channels of FDI is to blot the abstruse spillover from the adopted country firms. The Hard Technologies (industrial processes, accessories and plant) or Soft Technologies (technical know-how, administration ideas, business abilities etc) (Dunning and Lundan 2008) contributed by Multi-national Enterprises (MNEs) are advised the basic antecedent of bread-and-butter development and growth.
When a bunch close angular integrates with the developing country firms, host firms they are affected to accept by the MNE’s austere advice and standards to ensure affection appurtenances or casework in the anatomy of raw abstracts or upstream services. The adopted firms would adviser and assist, both managerially and technically which would advance to advance both in affection and abundance of account by the bounded affiliates. Additionally calm battling firms enhance their offerings to accumulate in clip with the adopted affiliated firms in the bazaar appropriately acceptable the host country firms’ productivity. The better US based retailer, Wal-Mart’s access and accelerated amplification in China has helped the acumen industry in Chinese bazaar to ascend college akin Zhu (2010).
For developing countries to carve their alcove in the all-around economy, they charge to be technologically advanced. There is a achievability of importing new technology from adopted developed market, but this will account a setback as the action would be expensive. Additionally countries will acquisition themselves alienated from the advance of technologies if they can’t advance consign markets Sachs (2008). This can be minimised to a ample admeasurement by MNEs ‘trickle down’ aftereffect wherein alteration of abstruse abilities from developed countries to developing countries occurs through FDI. The alteration of Panasonic’s bake accomplishment abject from United States to China has led to the attendance of 2800 Chinese enterprises to accommodate apparatus for it, which has not alone contributed new technology, but additionally avant-garde operations administration techniques to Chinese bazaar (Sinani and Meyer 2004).
The accident agency due to ambiguity of new technology’s after-effects and abundant advance thwarts the developing countries from introducing any new technology from scratch. The altercation in abutment of MNEs is that technologyÂ is the quintessential basic of bread-and-butter development and demands a lot of advance in analysis and development (R&D). Developing countries, however, abridgement both in abilities and funds basic for R&D, which has led to the amiss akin of R&D inÂ developingÂ economies. The host countries’ addition can be angry because of the attendance of MNEs, which would command assets all-important for R&D. Hence host firms can save on amount by application the technologies which are already implemented and acclimated by MNE’s application Demonstration (by MNE’s) and Apery (by host firms) (Das 1987; Wang & Blomstrom 1992, cited in Crespo and Fontoura 2007). About the apparent adjustment and claiming of arresting the abstruse abilities in the abbreviate appellation collaborative affairs makes the action actual arduous for the firms in the arising markets.
The animal resources’ advance from MNEs to bounded firms additionally act as a approach of technology alteration and addendum back the analytical training provided to these high-skilled advisers is blown to calm firms in the anatomy of avant-garde authoritative adeptness appropriately acceptable the calm enterprises which would contrarily be absurd (Crespo and Fontoura 2007).
Table 1: Summary of Spillover Channels of FDI (Blomstorm and Kokko (1998); Gorg and Greenaway (2001); Gorg and Strobl (2002))
The technology alteration usually occurs in a bazaar which is abominably aggressive and possesses no accurate bazaar structure. Back altered developing countries would accept altered bazaar structure, it becomes actual complicated to accept a ambiguous approach and archetypal to acquisition the account factors of abstruse spillover allowances to bounded firms (Mondal and Pant 2010). The after-effects of empiric abstraction by assorted advisers act as an another to analyse the net allowances of technology spillover for the host developing countries. The firm’s Absolute Agency Abundance (Factors like the akin of R&D, adopted presence, the close size) can be acclimated as a proxy to barometer technology alteration (Haddad and Harrison 1992, cited in Crespo and Fontoura 2007).According to Seck (2011) “A 10% access in a developing country’s adopted R&D basic banal leads to added than a 2% percent access in its absolute agency productivity”.
The bread-and-butter development akin (measured by per capita GDP) impacts acerb on R&D action (Cheung and Lin 2003). The advance in host country’s R&D activities reduces the abstruse gap and increases the absorptive accommodation of the host close thereby benefitting the host developing country.
According to Schmid (2010),” A one percent access in the Analysis and development (R&D) amount is associated with a bristles percent access in the likelihood of a technology transfer”. He additionally states that the technology alteration is absolutely activated to the barter flows and R&D amount of a developing country. R&D consistent in new processes and articles either amplifies firms’ revenues or saves firms’ costs and is advised as the basic proxy for autogenous advance and abstruse advancement, Zhu (2010). In 2004, 23.7 % of automated R&D aural China was performed by affiliates as compared to 21.7% in 2004 (UNCTAD 2005, cited in Dunning and Lundan 2008, p.359) which exemplifies accretion trend and possibly absolute aftereffect on host developing countries. Here the basic claiming lies in award the exact admeasurement of benign R&D activities.
If the about costs of technology acceptance are ample to the bread-and-butter amount of the basal technology (to the host country firms), there will be little acceptance almost and FDI spillover accomplished will additionally be almost bound (Blomström. et.al 1999). Appropriately amount of technology acceptance plays a above role for the technology alteration to be benign to the host country firms.
The factors accidental to the administration of abstruse accommodation (which includes College educational institutions, Scientists and Engineers, R&D laboratories and alternative concrete and animal assets) which are aided by adopted affiliates reflects the net benign aftereffect on host countries due to consign or FDI (Dunning and Lundan 2008). Alongside the absolute furnishings of abstruse accommodation of host countries, the aberrant after-effects can be abstinent through knowledge, technology and R&D spillovers to host economy’s bounded firms which can be abstinent in agreement of the accession in abundance of bounded firms as a aftereffect of the MNE’s attendance or access into host economy. About realising the exact admeasurement of abundance access alone due to MNE’s addition is a big claiming for abounding alternative factors would accept aided the process.
A abstraction by Xu (2000), cited in Dunning and Lundan (2008), suggests that the spending on royalties and licence fees about indicates the appulse of abundance accessory acquired due to technology alteration of FDI in the host countries. The absorptive accommodation of the developing countries varies and appropriately the absolute or abrogating furnishings based on it. The abstraction by Feinberg and Majumdar (2001), cited in Dunning and Lundan (2008) reveals that the biologic affiliates in India accomplished no spillover to bounded firms through locally conducted R&D admitting the adopted affiliates had benefited. On the contrary, a abstraction conducted by (Mondal and Pant 2010) shows the attendance of adopted affiliates and aerial absorptive accommodation for developing countries to appulse absolutely on technology spillover which is animated by a awful aggressive environment.
The behavior of host governments appear FDI such as technology action and Intellectual Property Aegis are additionally believable determinants which impacts the consequence of the adeptness spillovers captured by host country firms. For archetype government behavior which would animate the R&D achievement like able IP aegis would allay the affairs of FDI and accent the abstruse adequacy of bounded firms which in about-face would aid to accomplishment adapted adopted technology (Blomström et al. 1999). On the alternative duke patents filed by developed countries would aftereffect in bound alteration of abstruse capabilities due to the aegis of technology from apery for 20 years. China became the better almsman of FDI amid the developing countries during 1990’s due to the ‘market for technology’ action and administration of apparent law in band with TRIP’s (Trade-Related Intellectual Properties) (Cheung and Lin, 2003).
Due to contradicting analysis abstracts and the assurance of technology alteration allowances on the affectionate of industry and the akin of accord amid adopted and arising bazaar country firms, it becomes actual complicated to generalise the factors accidental to the net allowances of the developing countries.
According to (Dunning and Lundan 2008) “The adeptness to create, acquire, learn, use and finer arrange abstruse accommodation is one of the key capacity of bread-and-butter success in around all societies”. The exact realisation of net account of technology alteration to developing countries is abstinent application TFP as a proxy and can be added by deepening their bounded abridgement and capabilities to allure FDI arrival with the aid of austere and acrimonious government regulations.
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