Mnes, Technological Accumulation And Competitive Advantages
Competitive advantages of MNEs offer opportunities for the upgrading of the technological capacity of the foreign countries in which they operate. However, whether or not this occurs depends on the extent to which any such upgrading is consistent with the goals of the MNEs and the ESP configuration of the countries concerned. The impact of inward investment is also likely to vary according to both its sources and the stage of economic development of the recipient country.
For example, in the case of poorer developing countries, whose engine for growth is essentially factordriven, the most foreign MNEs can do is to help enhance the quality of their resources and labour force, and to provide additional assets of capital and technology by which existing products may me be produced more efficiently.
However, it depends on the structure of interfirm competition and whether the presence of foreign firms helps or inhibits the development of indigenous clusters of related activities. It also depend on the efficacy of the macroorganizational policies of governments, particularly with respect to upgrading the educational and technological infrastructure.
In the case of investmentdriven economic development, marketseeking FDI is likely to play a more important role than resourceseeking FDI in all but the smaller resourceintensive developing countries. The impact of inbound MNE activity on its a country longterm technological viability is likely to be critical. It is possible to identify both beneficial and unwelcome scenario.
Countries with a large domestic market which are achieving good productivity records and rates of growth, and are allocating an above average proportion of their resources to upgrading their human and physical capital, are more likely to attract inward MNE investment in technologyintensive activities.
Smaller industrial countries which pursue inefficient structural adjustment policies and are less competitive in world markets, are more likely to attract MNE satellites concerned in assembling and valueadded activities. Since these affiliates are able to import the competitive advantage of their parent companies, the may still be able to drive out their local competitors. Thus, the may well reduce the technological capabilities of indigenous competitors (and that of their suppliers), thereby lessening their capacity to accumulate new technology.
Cantwell (1987) and Cantwell and Dunning (1991) have shown that high value inbound MNE activity is likely to be attracted into innovative and productive sectors into innovative and productive sectors caught up in a virtuous circle of assets accumulation. In this way, it may well further increase local capacity, assist the dissemination of new knowledge to suppliers and customers, raise the quality of output, and efficient spur local rivals to a more the efficient rate of innovation. This type of sector is probably home to outward MNE investors which is likely to strengthen the position of local component suppliers.
Inward direct investment may still take place in declining sectors, but it is likely to be in low valueadded subsectors of the industry, importing the more high valueadded intermediate products. In this case, because of their higher efficiency, or by deliberate strategy, foreign affiliates may encroach on the markets of local competitors. Indeed, the foreign MNE may be able to finance an increased level of R&D within its parent company from it increased global sales.
At the same time, local firms whose markets are cut back may lack the resources to "go global"; themselves and, as a result, be compelled to cut back their R&D expenditures. If addition, the government of the home country prohibits, or creates obstacles to investment by foreign firms in its own domestic markets than this constitutes the type of "technological protectionism." In this situation, inward direct investment many not only drive out local competitors , but also restrict the creation of new technology by local suppliers.