Trade, Foreign Direct Investment, and International Technology Transfer : A Survey
The author surveys the literature on trade and foreign direct investment--especially wholly-owned subsidiaries of multinational firms and international joint ventures--as channels for technology transfer. He also discusses licensing and other arm&#...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/05/437640/trade-foreign-direct-investment-international-technology-transfer-survey http://hdl.handle.net/10986/19843 |
| Summary: | The author surveys the literature on
trade and foreign direct investment--especially wholly-owned
subsidiaries of multinational firms and international joint
ventures--as channels for technology transfer. He also
discusses licensing and other arm's length channels of
technology transfer. He concludes: 1) How trade encourages
growth depends on whether knowledge spillover is national or
international. Spillover is more likely to be national for
developing countries than for industrial countries. 2) Local
policy often makes pure foreign direct investment
infeasible, so foreign firms choose licensing or joint
ventures. The jury is still out on whether licensing or
joint ventures lead to more learning by local firms. 3)
Policies designed to attract foreign direct investment are
proliferating. Several plant-level studies have failed to
find positive spillover from foreign direct investment to
firms competing directly with subsidiaries of
multinationals. (However, these studies treat foreign direct
investment as exogenous and assume spillover to be
horizontal-when it may be vertical.) All such studies do
find the subsidiaries of multinationals to be more
productive than domestic firms, so foreign direct investment
does result in host countries using resources more
effectively. 4) Absorptive capacity in the host country is
essential for getting significant benefits from foreign
direct investment. Without adequate human capital or
investments in research and development, spillover fails to
materialize. 5) A country's policy on protection of
intellectual property rights affects the type of industry it
attracts. Firms for which such rights are crucial (such as
pharmaceutical firms) are unlikely to invest directly in
countries where such protections are weak, or will not
invest in manufacturing and research and development
activities. Policy on intellectual property rights also
influences whether technology transfer comes through
licensing, joint ventures, or the establishment of
wholly-owned subsidiaries. |
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