Strategic Management: Formulation and Implementation


It is difficult to generalize on the direct or indirect effects of MNEs on the innovatory capacity of host country. Two main views has been expressed:

  1. The first is that foreign direct investment (FDI) speeds up the process of economic development and restricting by providing technology, entrepreneurship and organizational skills at a lower cost than any alternative usage of resources, and by its competitive stimulus and spillover effects on the rest of the economy.
  2. Second, in the long run it is only likely to happen if MNEs do not distort (or add to the distortion) of assets or product markets, and so long as the control exerted their affiliates' activities is consistent with innovatory goals of the countries in which the operate.

The globalization of markets and the growth of intraindustry trade and investment is helping to bridge these views. All countries cannot expect to be technologically competent in all sectors. No country can expect to be entirely selfsufficient in its innovatory capabilities any more than it can expect to be self sufficient in all goods and services. Thus, the role of the MNE must be judged not only in the light of the effect it has in the generation of innovatory capacity, but also on the allocation of that capacity; and this, in turn, on the longterm economic interests of the country concerned.

To be able to utilize efficiently the accumulated technological expertise of foreign MNEs, host governments needs to pursues a positive and well defined technological strategy.

However, some countries may have limited power to influence the kind of technology they receive from MNEs or the terms of the technology creation or transfer. Thus, they may find it beneficial to group together to exchange information inter alia about other's bargaining and negotiating strategies and/ to formulate common policies towards technology acquisition or the creation of technological capacity by MNEs.