Benefit of Technology Transfer to Developing Countries
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 universe is disjoined no longer by ideology but by technology… 15% of the earth’s population, procures closely all of the universe’s technology alterations…half of the universe’s population, is potent to inoculate these technologies in genesis and decay. The fostering allot, envelope environing a third of the universe’s population, is technologically disjoined, neither fantastic at settlement nor inoculateing irrelevant technologies.” Sachs (2000)
According to the new Augmentation plea of the 1990’s, “Innovation is the excellent rise of technological progression…which in deflect drives economic augmentation”. One of the excellent motives of army clearing countries for widely accepting and inspiriting manifold machines of FDI is to collect the technological spillover from the irrelevant dominion rooteds. The Hard Technologies (industrial manneres, equipment and place) or Soft Technologies (technical know-how, treatment ideas, dispenseing skills etc) (Dunning and Lundan 2008) contributed by Multi-national Enterprises (MNEs) are considered the deep rise of economic outaugmentation and augmentation.
When a multinational rooted vertically integrates delay the clearing dominion rooteds, army rooteds they are unfeeling to tarry by the MNE’s restraining straightforwardion and standards to secure temper consequence or utilitys in the construct of raw materials or upstream utilitys. The irrelevant rooteds would regulate and back, twain managerially and technically which would make-over to amendment twain in temper and sum of utility by the persomal affiliates. Besides private strive rooteds repair their offerings to guard in stride delay the irrelevant affiliated rooteds in the dispense thus enhancing the army dominion rooteds’ productivity. The biggest US installed retailer, Wal-Mart’s note and speedy expansion in China has helped the logistics toil in Chinese dispense to surmount surpassing raze Zhu (2010).
For clearing countries to contrive their niche in the global dispensation, they insufficiency to be technologically deceased. There is a possibility of importing new technology from irrelevant questionable clear dispense, but this procure motive a setback as the manner would be proud-priced. Besides countries procure perceive themselves estranged from the progression of technologies if they can’t clear ship-produce dispenses Sachs (2008). This can be minimised to a considerpotent degree by MNEs ‘trickle down’ consequence wherein make-over of technological skills from questionable clear countries to clearing countries occurs through FDI. The make-over of Panasonic’s microwave manufacturing deep from United States to China has led to the closeness of 2800 Chinese enterprises to procure constituents for it, which has not singly contributed new technology, but besides deceased operations treatment techniques to Chinese dispense (Sinani and Meyer 2004).
The imperil element due to casualty of new technology’s consequences and stupid boarding thwarts the clearing countries from introducing any new technology from rake. The dispute in living of MNEs is that technologyÂ is the quintpromotive constituent of economic outaugmentation and demands a lot of boarding in imbibeing and outaugmentation (R&D). Developing countries, at-last, failure twain in skills and funds promotive for R&D, which has led to the imperfect raze of R&D inÂ developingÂ economies. The army countries’ alteration can be stimulated bemotive of the closeness of MNEs, which would charge media requisite for R&D. Hence army rooteds can secure on require by using the technologies which are already implemented and used by MNE’s using Demonstration (by MNE’s) and Transcript (by army rooteds) (Das 1987; Wang & Blomstrom 1992, cited in Crespo and Fontoura 2007). At-last the questionable decision and question of collecting the technological skills in the blunt engagement collaborative contracts makes the manner very challenging for the rooteds in the emerging dispenses.
The ethnical media’ restlessness from MNEs to persomal rooteds besides act as a machine of technology make-over and extension past the invariable inoculation procured to these proud-skilled employees is wild to private rooteds in the construct of innovative managerial power thus enhancing the private enterprises which would incorrectly be impracticable (Crespo and Fontoura 2007).
Tpotent 1: Summary of Spillover Channels of FDI (Blomstorm and Kokko (1998); Gorg and Greenaway (2001); Gorg and Strobl (2002))
The technology make-over usually occurs in a dispense which is partially competitive and possesses no alloticular dispense edifice. Past opposed clearing countries would accept opposed dispense edifice, it becomes very entangled to accept a generalized plea and mould to perceive the determinant elements of technological spillover utilitys to persomal rooteds (Mondal and Pant 2010). The consequences of experimental examine by manifold imbibeingers act as an resource to analyse the net utilitys of technology spillover for the army clearing countries. The rooted’s Whole Element Productivity (Factors relish the raze of R&D, irrelevant closeness, the rooted heap) can be used as a agency to measure technology make-over (Haddad and Harrison 1992, cited in Crespo and Fontoura 2007).According to Seck (2011) “A 10% augmentation in a clearing dominion’s irrelevant R&D proud accumulation make-overs to past than a 2% percent augmentation in its whole element productivity”.
The economic outaugmentation raze (measured by per capita GDP) impressions strongly on R&D essence (Cheung and Lin 2003). The augmentation in army dominion’s R&D activities reduces the technological gap and augmentations the absorptive competency of the army rooted thereby utilityting the army clearing dominion.
According to Schmid (2010),” A one percent augmentation in the Learning and outaugmentation (R&D) payment is associated delay a five percent augmentation in the relishlihood of a technology make-over”. He besides states that the technology make-over is unconditionally correlated to the exchange flows and R&D payment of a clearing dominion. R&D consequenceing in new manneres and products either amplifies rooteds’ revenues or secures rooteds’ requires and is considered as the essential agency for endogenous augmentation and technological progression, Zhu (2010). In 2004, 23.7 % of industrial R&D delayin China was commoditiesed by affiliates as compared to 21.7% in 2004 (UNCTAD 2005, cited in Dunning and Lundan 2008, p.359) which exemplifies increasing bear and perhaps decisive consequence on army clearing countries. Here the deep question lies in perceiveing the equitable uniformity of salutary R&D activities.
If the not-absolute requires of technology inoculateion are big to the economic treasure of the underlying technology (to the army dominion rooteds), there procure be illiberal inoculateion not-absolutely and FDI spillover realized procure besides be not-absolutely poor (Blomström. et.al 1999). Thus require of technology inoculateion plays a elder role for the technology make-over to be salutary to the army dominion rooteds.
The elements contributing to the distribution of technological competency (which includes Surpassing educational institutions, Scientists and Engineers, R&D laboratories and other natural and ethnical proceeds) which are aided by irrelevant affiliates reflects the net salutary consequence on army countries due to ship-produce or FDI (Dunning and Lundan 2008). Alongside the straightforward consequences of technological competency of army countries, the instraightforward consequences can be measured through realizements, technology and R&D spillovers to army dispensation’s persomal rooteds which can be measured in engagements of the establish in productivity of persomal rooteds as a consequence of the MNE’s closeness or note into army dispensation. At-last realising the equitable uniformity of productivity augmentation barely due to MNE’s subsidy is a big question for manifold other elements would accept aided the manner.
A examine by Xu (2000), cited in Dunning and Lundan (2008), suggests that the spending on royalties and licence fees approximately indicates the impression of productivity repairment motived due to technology make-over of FDI in the army countries. The absorptive competency of the clearing countries varies and suitably the decisive or privative consequences installed on it. The examine by Feinberg and Majumdar (2001), cited in Dunning and Lundan (2008) reveals that the pharmaceutical affiliates in India accustomed no spillover to persomal rooteds through persomally conducted R&D since the irrelevant affiliates had utilityed. On the opposed, a examine conducted by (Mondal and Pant 2010) shows the closeness of irrelevant affiliates and proud absorptive competency for clearing countries to impression unconditionally on technology spillover which is rich by a proudly competitive environment.
The policies of army councils towards FDI such as technology system and Intellectual Property Refuge are besides ostensible determinants which impressions the heap of the teachableness spillovers fascinated by army dominion rooteds. For in council policies which would aid the R&D execution relish consequenceive IP refuge would soothe the chances of FDI and incense the technological space of persomal rooteds which in deflect would aid to muniment delayhold irrelevant technology (Blomström et al. 1999). On the other index questionables filed by questionable clear countries would consequence in poor make-over of technological capabilities due to the refuge of technology from transcript for 20 years. China became the bigst case of FDI shapeless the clearing countries during 1990’s due to the ‘dispense for technology’ system and enforcement of questionable law in direction delay TRIP’s (Trade-Related Intellectual Properties) (Cheung and Lin, 2003).
Due to contradicting imbibeing facts and the assurance of technology make-over utilitys on the bark of toil and the raze of league among irrelevant and emerging dispense dominion rooteds, it becomes very entangled to generalise the elements contributing to the net utilitys of the clearing countries.
According to (Dunning and Lundan 2008) “The power to originate, realize, imbibe, use and consequenceively deploy technological competency is one of the key ingredients of economic prosperity in virtually all societies”. The equitable realisation of net utility of technology make-over to clearing countries is measured using TFP as a agency and can be repaird by confirmation their persomal dispensation and capabilities to induce FDI inflow delay the aid of restraining and restraining council decisions.