Strategic Management: Formulation and Implementation

Mnes, Technology And Innovatory Capacity: A Home Country Perspective

Nations have always sought to protect themselves against the perceived erosion of their competitive advantages. As consequence, home governments have hade to take account the unique and special role of MNEs as crossborder carriers of technology. Figure 21 identifies some of the concerns only expressed by home countries over the export of technology.

Several economists including Caves (1982) and Teece (1986), have suggested that where MNEs operate in an efficiencyenhancing way (e.g., by overcoming "natural" market failure in crossborder technology markets), they will enhance the longterm competitiveness of the home countries. They will do so both by promoting a more efficient international division of labour and by better exploiting the economies of common governance of crossborder activities.

Other economists (e.g., Kojima, (1978, 1990) and political scientists have argued that where MNEs engage in defensive oligopolistic tactics and where governments distort prices for the technology creating and using products, such activities of MNEs are likely to be welfare reduce. Robert Gilpin (1978) adds a political dimension to this argument and suggests, if the importing country should gain the higher share of the benefits from the import of technology, it could than well be at the expense of the political power of the exporting country.

The impact of FDI on the technological capacity of the home country will depend on the type of foreign investment, the condition under which it occurs, the home and host countries involved and the time horizon being considered. There are four main categories of foreign investment: market seeking, (natural) resource seeking, efficiency seeking (or rationalized) and strategic asset seeking.

Market seeking investment
Market seeking investment may positive affect the technological capacity of the home country in various ways. For example, an increase in demand for a firm's products may allow it to exploit economies of size and scope, and to finance new marketing and innovatory activities.
Resourcebased investment
There is no substitution between and domestic investment; the purpose of the technological transfer is to increase of protect the existing supply of primary products or to improve the terms of trade for the importing country.