TRANSFER OF TECHNOLOGY, FDI AND TNCs

Since the TNCs are the main actors in technology development, attention is focused on their role in the transfer of technology. A large proportion of R & D expenditure that forms the basis of technology development in today’s world of all global civilian R & D is concentrated within the TNC system comprising a component of 75-80 per cent. 

An important mode of transfer of technology is trade. The trade in capital goods is a very important mode of transfer of technology. All developing countries except Africa imported technology as import of capital goods. Total import of capital goods have risen substantially, Dramatic growth has taken place in imports of Asia and the Pacific region. The share of TNCs in capital goods imports of developing countries is considered to be very big. 

A TNC normally undertakes FDI when it possesses certain technological or other economic advantages over its competitors, which it finds in its best interest to exploit internally from a foreign location since technology forms an important part of the competitive advantages of a TNC. Many firms choose to service their foreign markets through FDI not only to exploit that advantage but also to retain the company's control over ‘their technology. TNCs generally transfer their most recent technology to their affiliates, while selling or licensing older technologies to locally owned firms and joint ventures. Hence, it is argued that FDI may be the only way for many developing countries to gain access to the latest technology and especially to certain key technologies. 

As noted earlier, the introduction of new products or qualitatively superior old products is. One of the ways by which technology promotes growth. One important way of assessing how transfer of technology is taking place by the TNCs is to measure the expansion of the share of sales of high and medium research intensive industries.

The creation of production facilities by TNCs in high and medium research intensive industries can imply technology transfer not merely through a changing product composition but also through the training of host country personnel in new skills and introduction of new management methods and a new way of organizing the production process. 

As evidence, an overwhelming proportion of the foreign R&D of TNCs is located in developed countries. However, in countries like India, the Republic of Korea and Singapore, the TNCs have established R&D units of significance. But most often these R&D units are typically confined to adapting the technology of the parent company to local conditions. In a sample of 218 Japanese TNCs, 57 per cent expressed the view that the main objective of their foreign R&D facilities was to develop products tailored to meet local demand. The effects of TNCs on deeper indigenous research and innovation capabilities (know-why) in developing countries is less evident. As TNCs can import all their 'know-why', it is possible local firms] nay conduct more R&D.

It may also be that a strong presence of TNCs can inhibit the development of an indigenous technology. Foreign competition could also induce domestic firms producing similar products to undertake R&D that otherwise would not have taken place in order to improve that competitive advantage. FDI could also, it is stressed, improve the local innovating capacity in areas in which the host country and its firms are strongest and have a competitive market structure.