Posted on

Technology Contribution Of Multinationals Importance To Developing Countries Economics Essay

In this universe many things can be shared, transformed and utilised which helps to the development of civilisation, but cognition is the rarest of rare wealth that can non be stolen and it remains integral with a individual until it is expressed. Once it is expressed, there is no warrant how it is used and manipulated. To command this unauthorised usage of engineering several Torahs like patent Torahs, right of first publication Torahs etc were drafted all around the universe. Knowledge is recognized as one of the capable resources for dynamic planetary concern environment. ( Sharif et al. ) Technology transportation is non an easy issue it has possible to act upon the political and fiscal dealingss of states besides. Multinational companies are holding a rare chance to reassign the new engineering to the developing states. In recent times the nexus between the engineering transportation and foreign direct investing through transnational companies became cardinal board of the issue in all international economic sciences and economic growing arguments.

Importance of engineering transportation from MNC ‘s to developing states:

Transportation of engineering by Multinational Companies is considered as a blessing to the developing states. Every developing state instead than depending on the inexpensive labour to develop economic system should besides concentrate on the rational capital and invention capablenesss. So there should be attractive constabularies from the authorities to do certain that transnational companies should co-operate to raise the research and development capableness in the state. Multinational companies are capable of engineering diffusion, cognition creative activity and research & A ; development capacity ( Worasinchai and Bechina 2010 ) .

There are several agencies of engineering transportation and common benefit is derived out of it for both the development states and the transnational companies. Some of the factors that have major impact upon the cognition sharing mechanisms are steadfast features, industrial features and concern theoretical accounts. During the last decennary with the turning globalisation spectrum, foreign direct investing ‘s ( FDI ‘s ) are coming to developing states. Multinational companies are capable of making new occupations thereby lending to the development of economic system and public assistance of the part in peculiar. This will besides better the figure of taxpayer due to betterment in the wage of the employees. This allows the authorities to pass this economic beginning in the countries of wellness attention, instruction and substructure development ( Bruce 1979 ) .

Constitution of transnational companies paves manner to the entry of developing states into the planetary market which helps it to understand the modern values and concern patterns. Attracting transnational companies and thereby bettering the foreign currency and foreign direct investing is a better option. Brining loans from the national development organisations, World Bank and other organisations with batch many understandings is hard and alternatively, it is easy to promote transnational companies to put. Multinational companies are recognized as powerful engines for economic development than any other beginning ( Bruce 1979 ) .

Multinational companies improve fight in the development states by act uponing few facets such as capital, exports, competence/skill, engineering and substructure. Transportation of engineering with interactive effects are based on accomplishing “ sensible compatible ” ends between low developed states and multi national companies ( Madu and Jacob 2002 ) .

With the WTO and GATT regime the entry of transnational companies became easy even in the developing Orthodox communist state like China. For every company and state engineering and invention are of import in brining competitory border. By liberalising its policies China is be aftering to construct its engineering and invention capacities through foreign direct investings. The engineering transportation is done by multi national companies through assorted methods:

1. Forward and backward linkages of MNC ‘s with the local clients and houses.

2. Initiation by the local houses after detecting the forms and procedure of MNC ‘s.

3. Enrolling the employees with experience in MNC ‘s.

4. Transporting out the research and development activities of MNCs in the host states.

Direct transportation of engineering is done through presenting new procedure techniques, capital goods, new merchandises and new direction accomplishments. Direct transportation is the consequence of spillovers such as forward and backward linkages, competition effects and trained worker migration. The sum and degree of cognition transportations may be linked to the local industry features. There should be a balanced degree of absorbent capacity and engineering involved in the work. So host state capableness in absorbing that technological spillover is besides a finding factor in proficient promotion ( Glass 2001 ) .

China tops the developing states with immense magnitude of foreign direct investing inflows with one tierce of entire universe FDI investings and even received more FDI influxs than US in early 2000s ( UNCTAD 2005 ) . Technology transportation to China from MNC ‘s is largely through indirect effects. Several researches were conducted on these topics revealed interesting decisions. A research conducted in Venezuela during 1976-89 pointed out that “ spillovers ” are infinitesimal from foreign endeavors or even negative from the joint ventures. A survey conducted in Indonesia, found that domestic houses benefited through the high productiveness taking to spillovers and non due to the foreign ownership.

Factors finding the benefits of host state:

On the other side of the coin, there is a opportunity of restricting the autochthonal technological growing capablenesss. Local technological research and development is curbed and “ crowding-out ” effects may besides happen. Generally MNC ‘s will non reassign engineering, as they wish to keep monopoly over the market ( Zhao and Zhang 2007 ) . The engineering transportation by the transnational companies is non appropriate to the host houses thereby impacting their opportunities to vie in the planetary market. There is a demand to absorb that engineering by set uping those industries that are compatible to that transferred engineering.

The American type engineering transportation attempts to monopolise the market and there exists a spread between having and supplying states in a peculiar industry that is expected to reassign engineering. It is a type of reverse-order engineering transportation. This will non ensue in any benefit to the host state and merely supply an out-station ( Kojima and Kiyoshi 1977 ) .

Multinational companies besides take adequate steps to command the sum and sort of engineering transportation through following steps:

1. Restricting the advanced engineering to the subordinate houses in the host states.

2. Transfering the engineering that will non tactically give advantage to the host states.

3. Using the rational belongings Torahs to keep the technological advantage.

4. Importing of cardinal industrial inputs from the parent company to its subordinates thereby minimising linkage effects.

There are some factors impacting the engineering transportation policy in less developed states including economic, societal, political etc. Even the international environment is besides impacting the transportation policy. At this point of clip, engineering, human resources and capital are the three beginnings impacting the concern. There need to be a clear apprehension of what is engineering transportation, how it is decently done and who does it good. After accomplishing lucidity on these inquiries, a specific authorization is to be organized which keeps updates about what is available and what is needed in footings of new engineerings. Transportation of right engineerings to right finishs with right spirit, at right clip should be done. ( Saklou 2000 )

Factors finding the viability of transferred engineering in developing states:

The transferred engineering must incorporate societal, political, proficient and environmental demands of host state, where establishing on these merely the benefits are tested.

Social factors:

By and large the MNC ‘s will seek to work the inexpensive labour available in the development states. They transfer the engineering that will help these labours for that intent merely. To find whether this engineering is utile or non, it is based on the capacity to recycle the experience in the other relevant industries or set up its reproduction if it ‘s cost effectual. The human resources available in the host state should be in a place to understand and accommodate the engineering. The transferred engineering should besides help in developing the basic substructure of the host states. Objective of MNC is to work the resources, but there is a turning demand of societal duty from these establishments, apart from the engineering transportation and FDI ‘s. Constitution of charity trusts, educational establishments, old age places etc are the extension of these duties in the host state with or without utilizing the advanced engineering. Corporate Responsibility is defined by the World Business Council for Sustainable Development as the “ ethical behaviour of a company towards society ” . The corporate duty of MNC should be accompanied with the societal duty bettering the host societal conditions non merely by contributions but besides through steadfast actions of reassigning utile engineering as a long term step ( Vidya Hattangadi 2005 ) .

Technical factors:

One of the outstanding predication of the TRIPS understanding is that rational belongings rights protection and enforcement will lend to the airing and transportation of engineering. It besides stated that developed states shall promote establishments to reassign engineering to the least developed states. The rigorous IP constabularies are dependable with the interrelatedness in consideration with the other factors including the construction of factor supply, size of domestic markets, the grade of stableness of the macroeconomic environment and productive substructure. As there are adequate IP Torahs, the developed states will be free to reassign engineering. At the same clip provided with the rigorous patent, hallmark, trade secrets the developing states can concentrate on the autochthonal engineering development without infringement fright. These proficient factors will assist the host state to accommodate engineering and develop autochthonal engineering without violation ( UNCTAD-ICTSD Project 2003 ) .

Political and Economic factors:

Political factors play a important function in transportation of engineering from one state to other state. The developed state allows its MNC ‘s to set up in the states with ideal environment and bilateral understandings and even the host states will hold its ain reserves in leting MNC ‘s. There is a demand for strong ties in leting its defence and atomic engineering transportation. India makes batch of defence purchases from France and Russia and established joint ventures with them. The recent atomic trade with US for atomic engineering and atomic stuff benefited India to a big extant. Economic reforms like FDI policy, Industrial licensing, exchange control and revenue enhancement encouraged many MNC ‘s to set up in India. This has improved the healthy competition per capita income and even expected to make 35 times by 2050. MNC ‘s are paying more to Indian staff than the other in the geographicss due to their ability ( Siliconindia 2008 ) .

Environmental factors:

China and India are the biggest pharmaceutical exporters of the universe. Both in India and China, there are batch of MNC ‘s established where research and development is done at host state. There is a strong unfavorable judgment on the developed states that, they choose these developing states to do certain that their state will non acquire any injury through the research on the medical specialties as there are opportunities of harm to the public wellness. Bhopal gas escape incident is besides a clear illustration of this kind. Apart from the negative facets, the transferred engineering in this industry placed these developing states in top place. Bettering in the general medical attention of the state by supplying equipment and installation investings and developing wellness attention workers by MNC ‘s is a welcoming measure ( Medcof and Chatoorgoon 2006 ) . The engineering transportation in agro-business will assist to keep self-sustainability in developing states. Inducting biotechnological procedure and seeds produced coveted consequences in most of the developing states ( Sankat 2007 ) .


Technology transportation is the most of import benefit through the MNC ‘s to the local states, but there is no warrant that it is automatic or free. This engineering transportation is done merely through spill over and non through transportation. Major FDI ‘s are received merely in the low engineering industries, where immense labour is required and few advanced technological inputs are sufficient. More transportation is done due to the presence of MNC ‘s leting the local houses to cognize through the procedure of observation, initiation of trained workers and bettering competitory accomplishments. There should be a balance between the transportation and absorbent capacity. Research and Development industries will hold more entree and opportunity to technological spillovers from FDI.

MNC ‘s should reassign the engineering that suites to host states and local authorities besides should take proactive stairss and take the suggestions of the analysts about its benefits to host state before leting FDIs and MNCs in a peculiar country. Transportation of engineering should non be merely a copying procedure from the developed states, but it requires acceptance that recognizes the autochthonal capablenesss necessary to equip place conditions.

Leave a Reply

Your email address will not be published.