Technology Transfer By Multinationals To Developing Countries Economics Essay

Among the assorted drivers of globalization, cross boundary line investing is likely the most outstanding ( Gorg and Greenaway 2003, p.1 ) . ) . While multinationals are aiming developing states, developing states themselves are pulling and lending towards the of all time increasing rate of planetary investing ( Guislain and Kusek 2010 ) . The raison d’etre of any transnational is the superior engineering they have acquired through puting in research and development. Broadly, engineering enables improved quality, addition in end product and cost decrease for any merchandise or service. Enterprises in the development states hesitate to put in R & A ; D for assorted grounds and are benefited when a transnational brings new engineering to the host state. This essay is basically traveling to reflect on precisely why the engineering facet is so of import to the developing states and will they really benefit from it.

The benefits of advanced engineering are evident and huge. Since the development states are fighting to better the criterion of life of its people, precedence has to be given to the basic demands of people. In the agricultural industry, handiness of nutrient harvests has to be increased to get the better of deficits and dispel hungriness. This can be done by increasing the agricultural production by doing available to husbandmans seeds for high giving intercrossed harvests, which are immune to plagues that destroy the output. Genetically modified intercrossed seeds produced by multinationals like Monsanto have helped the husbandmans at Gujarat in India to increase their output ( Monsanto 2010 ) . In the fertiliser industry, developing states need the engineering given by multinationals to bring forth complex fertilisers on a monolithic graduated table. Indian companies like Larsen & A ; Toubro derive its procedure experience from multinationals like Linde, ICI, MW Kellogg etc. to bring forth Ammonia and Snamprogetti, Stamicarbon, Toyo etc. for urea industry ( Larsen & A ; Toubro 2010 ) . Technology involved in supply concatenation direction like cold storage, bulk conveyance systems and scientific stock list control developed by multinationals like Walmart, PepsiCo and McDonalds help the developing states by non merely giving higher procurance monetary values to husbandmans but besides cut downing cost to clients by extinguishing wastage, proper savings, expeditiously pull offing supply concatenation and extinguishing jobbers between husbandmans and consumers. This will be possible for developing states if they adopt the proved engineering from transnational retail merchants who have the systems developed.

Technology enables the production of necessary goods in the most efficient manner. It is possible to run into the vesture demand of people at more low-cost monetary values. The entire demand for vesture can non be met my natural fibers entirely. The engineering for bring forthing and treating manmade fibers like nylon, polyesters and acrylic are available with multinationals like Dupont, Lurgi, ICI and Barmag. Lurgi GmbH works in coaction with Chinese company, Fujian Jinjiang Technology to bring forth high-end polymeric amide fibres used for all sorts of fabric applications ( International Fiber Journal 2010 ) . Developing states can bring forth such manmade fibers through proficient and fiscal coaction with these multinationals therefore run intoing their demand.

The procedure of independently developing effectual engineerings to run into the pressing demands of economic system and good being of people will be extremely expensive for developing states if non impossible. Under such fortunes, it is good to get certain advanced, already available engineerings from multinationals ( Lall 1976, p. 26 ) . Treatment of diseases like AIDS, T.B, Cancer and Malaria require drugs and medical specialties which are under uninterrupted development and betterments. Multinational pharmaceutical companies like Smith Kline & A ; French, Novartis and Pfizer invest and deploy a batch of resources towards R & A ; D. Novartis is dedicated towards researching interventions and vaccinums for diseases of the underdeveloped universe in coaction with world-wide spouses like Melinda Gates Foundation ( Novartis 2011 ) . Novartis is besides join forcesing with Indian pharmaceutical companies for licensing, R & A ; D and selling activities ( Pharma Pulse 2000 ) . Since developing states do non hold the financess or resources for such R & A ; D activities, they invite multinationals through coactions in order to do usage of their engineerings. Similarly, the procedure engineering for seting up oil refineries to run into the energy demands of developing states is given by multinationals like BP, UOP, Exxon Mobil, Burmah Shell ; Technology for coal gasification is given by Foster Wheeler, Conoco, Philips etc. Unless these engineerings are provided by multinationals, thermic power Stationss, railroads and cars can non be run. To bring forth electric power through atomic fission, engineering is given by multinationals like General Electric, Westinghouse etc. Developing states need to travel for atomic power to cut down C emanations to counter planetary heating.

MNC ‘s non merely discover and develop new engineerings, but besides back up its activities by supplying complementary factors such as direction, technicians, serving, trouble-shooting, particular stuffs etc. ( Lall 1976, p.26 ) . Developing states, in their pursuit for cut downing dependence on imported petroleum, explore for oil both onshore and offshore. Explorations need specialized and extremely sophisticated engineering peculiarly for deep sea boring which is available with a few multinationals like BP, Shell, Cairn Energy etc. Developing states like India have benefited from such engineering by increasing its petroleum demands from oil Wellss drilled both onshore and offshore with the aid of these multinationals.

However, there are certain factors which determine whether or non the transferred engineering really benefits the host developing states. Harmonizing to Gorg and Greenaway ( 2003, p.3 ) , the host developing states can increase its productiveness via four spillover channels: imitation, skills acquisition, competition and exports. Imitation of a merchandise or procedure by utilizing the cognition of multinationals can ensue in upgrading local engineering with attendant benefits for productiveness of local houses. Local Chinese houses like AMD have used the microprocessor engineering from market leaders like Intel and come up with their ain processors like K5 and K6 which have been successful ( The Economist 1998 ) .

The engineering transportation from multinationals to host state houses is besides realised through preparation of local employees from simple fabricating occupations to high managerial degree professions. Multinationals besides create a demand for extremely skilled alumnuss which has led to the authorities in developing states to put in formal instruction for third degree classs like technology, natural scientific disciplines and concern direction in states like India and China ( Blomstrom and Kokko 2002, p.16 ) . These benefits besides influence non transnational work force in developing states through direct spillovers to complementary workers and through transnational workers who may transport their cognition of engineering and direction when switching to other companies ( Gorg and Greenaway 2003, p.3 ) . All these activities result in a stronger work force, diminishing unemployment rates and therefore increasing the overall economic system of the underdeveloped state.

Competition spillover leads to efficiency in local houses therefore increasing productiveness ( Gorg and Greenaway 2003, p.4 ) . Indian steel makers like Essar Steel succumbed to international competition from taking transnational sellers like Mannesman-Demag Huttentechnik of Germany therefore supplying lower cost, energy and environment efficient engineerings and patterns ( Perkins 2007, p.288 ) . Such healthy competition will ensue in overall development of the host developing state. With the debut of direct-to-home orbiter telecasting through joint ventures by Tata-Sky, it has led to the debut of many other similar engineerings like Dishtv, BigTV, SunDirect by other Indian companies therefore profiting the Indian client with low subscription fees. However such engineerings have put the local overseas telegram Television operators out of concern.

Domestic houses of developing states have benefited from export spillovers by perforating the export markets through coaction and imitation of multinationals. Surveies show that productiveness degrees of exporting houses are higher compared to non-exporting houses ( Gorg and Greenaway 2003, p.4 ) . China ‘s Ministry of Commerce studies that over half of China ‘s exports were due to Foreign Invested Enterprises which accounts for 30 per centum of the state ‘s industrial end product. This laterality is particularly in the engineering sector with every bit much as 40 per centum of FIEs exports dwelling of high engineering goods. China acquires this cognition basically from houses arising in the U.S and indulges in industry of a diverse scope of technological goods ( Chandrasekhar 2011 ) .

The capacity of a underdeveloped state to follow the engineering provided by multinationals will depend on the absorbent capacity of the state. A broad technological spread will ensue in a shortage in resources such as human capital, physical substructure and other factors required for inward investing ( Gorg and Greenaway 2003, p.5 ) . The Economist ( 2003 ) studies that absorbent capacity was the biggest job that holds back Africa from contending against diseases like AIDS. Even though there is generous aid from givers, private sectors and pharmaceutical companies who are seeking to do a difference, states like Tanzania find it hard to absorb and pass the contributions efficaciously due to miss of nurses, physicians, good conveyance and communicating installations.

Some engineerings have been developed by multinationals to accommodate conditions in developed states where there is labour scarceness and capital copiousness. If these engineerings are introduced in developing states, it many consequence in unwanted allotment of resources, unemployment and concentration of wealth among capitalists ( Lall 1976, p.27 ) . Automatons are being used in the agricultural industry in order to automatize arduous work of husbandmans. These advanced engineerings are utile in the primary sector which is residuary in the developed economic systems, but of great relevancy in the development states ( Honda-p3 2009 ) . Automatons are besides being developed to manage assembly occupations in car mills, pigment stores etc. These may be advantageous for developed western states where there is a deficit of work force. However in developing states where there is an unemployment crisis, the available work force has to be trained. Technology developed entirely to run into manpower deficit will non be good to developing states.

Large companies all around the universe ever strive to better their merchandises therefore seeking to develop their trade name image which consequences in net incomes. Technology plays a critical function toward this. Often, developing states are mostly benefited by advanced engineering brought in my multinationals through FDI, Joint ventures etc. Multinationals can besides present a menace to bing companies in a host state by conveying their merchandises straight in competition. Nevertheless, the raid of engineering ever tends to an addition in healthy competition therefore bettering an industry as a whole.