Contents - Previous - Next

This is the old United Nations University website. Visit the new site at

Towards a revised framework

Almost as soon as the picture of technology transfer sketched above became the accepted wisdom and the defensive strategies of the developing countries were put in place to counter their effects, evidence from newer studies and the changing environment began to suggest that, while the policies were often a necessary and useful step forward, they overemphasized short-run costs, were based on a static view of technology, and did not pay sufficient attention to the more basic issue of building up domestic capacity [25, p. 52].

The revisions to the framework came from various sources. First, the concern with technology issues generated new studies, some of which attempted to corroborate the validity of the framework while others attempted to examine the impact of the regulations. Still others took as given that in all developing countries, almost all modern technologies had been imported at some time and that such imports will continue and will probably increase. Therefore, they attempted to understand the factors influencing technical change, innovation, learning, and the building up of domestic technological capacity in the developing countries, with technology transfer as only one factor within a much larger set [53, pp. 15-16; 24, p. 5].

The revised framework takes as given that the nature and effects of technology transfer will vary depending on the nature of the actors involved, their characteristics, and the nature of the technological, economic, and policy environments that confront them; it then develops a more complex and varied picture of the processes and variables involved. This picture has been strongly influenced by the increased body of empirical and theoretical work along Schumpeterian lines on the factors affecting technical change, innovation, and technological capability. The final set of influences came from the changing global political and economic context, together with a rapid increase in the rate of technical change originating in the OECD countries.

Transaction costs and terms

We have reviewed the evidence of "excessive" profits made by technology suppliers from their control over technology. The government regulations, the setting of acceptable standards of royalty payments for different types of technology, and the elimination of many practices that allowed additional payments (e.g. through the supply of tied inputs) substantially reduced the payment levels. A study in Colombia [28] reports that with the new regulations, 395 contracts were reviewed between 1967 and 1971. Of these, 61 were rejected. In the remaining 334, through renegotiations, royalties were reduced by 40 per cent, or US$8 million per year. In a later period, renegotiations led to the elimination of export restrictions and of tied purchase of inputs in 90 per cent of the contracts and a reduction of minimum payments in 80 per cent of contracts. Similarly, in Mexico after the new laws were passed, 30 per cent of the contracts submitted in the first year were rejected [2, p. 153]. Aguilar cites a case where the Mexican Registry was able to obtain significantly lower rates through negotiations with technology suppliers. The Nigerian National Office of Industrial Property stated that thanks to renegotiation of terms, the country saved 115.9 million naira (at the 1990 exchange rate, approximately 10 naira=US$1) in 205 technology contracts registered. Similarly for India, Balasubramanyam [5] and Desai [19] point out that essentially the government regulations regarding payment levels forms and those regarding restrictive clauses are largely adhered to, though there are some violations. Chudnovsky [12] found that in most countries, a maximum ceiling of royalty was fixed at 5 per cent, the maximum duration was 5 years, and most restrictive clauses had been declared illegal. He found indirect evidence in Latin America that the rate of royalty payments and intra-firm royalty had been reduced with no apparent reduction in the flow of technology. And in Korea, after the liberalization of controls in 1978, a subsequent review showed that there was a sharp rise in the payments made for technology while the flow was unchanged [78, p. 185].

But a number of studies, particularly from India, suggest that government controls had a number of negative effects on technology transfer agreements. It is argued that the regulations reduced the "quality" of technology supplied to Indian firms as the price was reduced. Before examining the Indian data, we should look again at one of the major assumptions in the technology regulations debate. It had been argued that technology is knowledge and once created all can freely make use of it. Hence the only cost of transferring technology would be its marginal cost and the marginal cost would be close to zero [65, 79]. However, Teece [66] found in a study of 26 technology transfer projects that there were considerable costs involved, and they were higher the more complex the technology to be transferred, the larger the gap between the technological level of the supplier and that of the recipient. The costs are also significantly higher when the technology is transferred initially, but with experience the costs for subsequent transfers decline.

Contractor [14] confirms these findings and details the various types of costs involved for the supplier. He provides three categories of costs: the direct costs of the transfer, i.e. travel, training, personnel, documentation, and related costs; the opportunity costs of transferring technology; and the sunk, development costs. Bell and Scott-Kemmis [6] provide additional evidence of significant direct costs. Niosi and Rivard [47] suggest that the opportunity cost is of two types. One is the potential cost of market loss and competition by the recipient, but this is more often of theoretical rather than practical concern for many transactions, since in the majority of cases the suppliers do not see most recipients as capable of encroaching on their markets. The second, the opportunity cost of the skilled personnel utilized in the transfer process who could have been used more profitably in other activities, is often more important for smaller technology suppliers.

Variations in technological elements and price

The evidence from India [34, 19] suggests that the actual direct costs of technology transfer vary according to the elements being transferred. They are lowest when existing designs, drawings, specifications are copied and shipped to the recipient. The transfer costs increase as more human-embodied knowledge and skills, which are largely uncodified, are transferred. Costs also increase the greater the amount of training provided to recipient firms, and they are even higher if the process or product technologies of the supplier have to be modified for small market size in the recipient countries and for different demand patterns and factor and resource endowments. Furthermore, the direct and opportunity costs for the supplier increase to the extent that skilled personnel are utilized to effect the transfer and if the transfer harms potential or existing export markets. The potential loss would be considered larger by the supplier where more exclusive and more recent vintage technological assets are to be transferred.

The studies of technology transfer confirm the interplay of these factors in the decisions of suppliers and recipients regarding not only whether technology will be transferred but what elements will be transferred and in what forms. Large, powerful, technologically advanced manufacturing firms, without serious constraints of human resources and capital, prefer, as they expand, exports from the home base except when either there are significant barriers to exports or an export base provides significant economies of production for regional or world markets If the developing country location is important for market and production reasons but government policy precludes or makes difficult wholly owned subsidiaries, or if the firm has resource constraints, it will opt for joint ventures or licences for technology as the next best option.

If the market is small or the firm believes the risks of equity investment are high, it will tend to prefer contractual arrangements over equity investment. The higher the payments for technology, the more inclined the supplier will be to incur higher costs in technology transfer. If the remuneration is not high enough, it may still proceed to incur actual losses in the technology transfer if it is relevant to its long-term strategy of market penetration, knowledge, or foothold. But if the potential losses are significant it will attempt first to reduce costs by providing cheaper technology elements, and finally it will refuse to enter into any technology transfer agreements.

Studies of European technology transfer to India suggest that the reductions in payment levels have had an adverse effect on the supply of technology to Indian firms. The suppliers were less interested in providing technology that had high future profit potential, and when transfers were agreed to, the elements of production know-how included were narrow, fragmented, and did not cover all relevant knowledge. As one supplier stated, "what was transferred were dies, drawings, specifications, not 'know how' let alone 'know why'. They acquired a tiny fraction of the technology" [6, pp. 80-81].

Recipient expectations were also inhibited by payment restrictions. In many cases the Indian firm was aware that, because of its inability to pay due to regulations and/or to its small size and the small market for the product, it could not afford more expensive technological elements. So its acquisition strategy involved seeking out sources and elements of technology that could be accommodated within the limits of its capacity to pay.

Bell (1982) has categorized the elements of technological knowledge into three types: those required to operate the machinery; those required to solve production problems and undertake expansion; and those required to initiate technical change. Mlawa [39] found in a study of the textile sector in Tanzania from 1960 to 1980 only elements of the first type and even these were not comprehensive. The Tanzanian firms acquired only the basic minimum skills of operation but little in the way of engineering and product design. Again, in a larger study of technology acquisition from the United Kingdom by Indian firms, Bell and Scott-Kemmis [6] report that in many cases, the first type of flows were the minimum contractually required, could be easily provided, and were often narrow and fragmentary. There were few flows of technology representing the other elements. In one part of the sample, this appears to be due to the unwillingness of suppliers to undertake additional effort given the low rates of payments. In other cases, they were not even sought or demanded by the recipient. Sometimes the firm was satisfied with the subset of elements because it sufficed to commence production and make profits. The market did not require it to be more efficient. In other cases, the firm was not able - that is, did not have the requisite technical staff and facilities - to utilize the additional elements of knowledge and so did not seek them. There were even instances in which firms were not aware that important additional elements were available to be acquired.

New perceptions of the actors

Theory suggests that the greater the number of supplier countries and supplier firms, the greater the competition among them. The keener the competition, the lower the price at which technology would be available. This is supported by evidence in several ways. First, it should be noted that the perception that there were a small number of technology suppliers in any given product or process was probably more valid during the period immediately after the Second World War. Because of the destruction of industry in Europe and Japan, the United States was almost the sole supplier of foreign direct investment and US firms had large technological leads and were the most active in their efforts to expand internal market shares. But the subsequent decades have seen the increasing presence of European firms and the emergence of Japan as a major new source of technology. Between 1960 and 1985, total foreign direct investment has increased from US$99 billion to US$693 billion; the United States accounted for 47 per cent of the total in 1960 but only 35 per cent in 1985, whereas Japan has increased its share from 0.7 per cent in 1960 to 11.7 per cent in 1985. Developing countries supplied I per cent of the total in 1960 and 2.7 per cent in 1985 [78, p. 24]. Similar global statistics on licence agreements by number, value, and sources are not available, but the data available for various recipient countries show that all countries have diversified their sources of supply over time.

The former USSR and eastern European countries also became more important sources of technology transfer during this period. Though in numbers and value their contribution was small - they accounted for less than 0.2 per cent of world foreign direct investment and less than I per cent of affiliated enterprises - they played a key role in transferring technologies, sometimes unavailable or available with undesirable conditions, to certain developing countries and in certain sectors. For instance, in India such transfers were critical in reducing the monopoly powers of international steel, pharmaceutical, electrical, and machinery firms and allowed initial capacity to be built up in these sectors.

Another important and noteworthy feature has been the emergence of a number of developing countries, such as South Korea, India, Taiwan, Hong Kong, Brazil, Argentina, and Mexico, as technology suppliers in the world market. These countries have been increasingly significant as exporters of smaller, more standardized, technologies, which are often scaled down and more labour-intensive than those available from the traditional sources. So it appears that while monopolistic powers have been available to suppliers, the extent of these powers over time and across sectors may have been exaggerated. In many sectors and for standard technologies, these powers appear to be declining gradually. Bell and Scott-Kemmis [6] find that in a sample of technology suppliers to India, a tiny minority could be described as monopolists, and even in oligopolistic market structures, competition among suppliers was often intense.

Increased competition among suppliers and the greater experience of the developing countries with transfers encouraged suppliers to make considerable efforts to adapt. They became more flexible and accommodating towards host country policies, and in many cases were prepared to transfer core skills provided the compensation was adequate. The response by multinationals to the restrictions on subsidiaries and direct investments has been a rapid rise in joint ventures and forms of non-equity participation such as licensing, management contracts, franchising, turnkey projects, and subcontracting [48]. These forms are often attractive to suppliers as they can produce significant revenues with lower risk.

At the same time, in certain technology-intensive sectors such as consumer electronics or pharmaceuticals, core technologies remain available normally to subsidiaries only.

The role of small supplier firms

Similarly, policy regimes driven by perceptions of the need for hard bargaining with large, powerful multinationals in all cases may also be overdrawn. This is not to deny the power and importance of the multinationals in certain technology-intensive sectors. For instance, 97 per cent of US employment in chemicals, 86 per cent of employment in transport equipment, and 90 per cent of US trade originate with multinationals [78]. At the same time, however, smaller companies are increasingly active in technology transfer and their significance appears to be increasing.

In a study of technology transfers to India, it was reported that "two thirds of the suppliers [from the UK], accounting for 40 percent of the agreements had 500 employees or less and a quarter of them had 50 or less." But also, a very small group, about 10 per cent of the suppliers, were very large (with more than 10,000 employees) and accounted for 40 per cent of the agreements [6, p. 37]. Similarly, the sample of Indian technology agreements with Belgium and the Netherlands included a large percentage of small, and larger non-transnational, firms [16, p. 112].

Other evidence suggests that the number of smaller firms entering technology transactions has increased over time and their importance is growing [47]. With the increase in smaller suppliers and the greater flexibility offered by large firms, the range of options for developing countries has increased as regards choice, terms, and control. But the exercise of these choices is accompanied by the recipient sharing a greater proportion of the risks. At the same time, we must acknowledge that in a number of sectors and in key technological areas, there are few other suppliers besides large multinationals, and for many projects the smaller suppliers complement but do not replace large suppliers.

The earlier literature had emphasized that technology transfers were initiated by the suppliers, according to their preference for equity participation, and that they were confronted by weak, passive, small, and poorly informed recipients. This too appears to have been exaggerated. It was first pointed out by Reuber [57] that often the developing country firms initiated the process of technology transfer and sought equity participation. These firms believed that with equity participation there was greater involvement by the technology supplier, greater interest to ensure that the technology could be used successfully for production, and that equity participation ensured a degree of risk sharing between the supplier and recipient. This is further documented by Balasubramanyam [5] and Contractor [14].

In many cases, the developing country firms had made a careful study of the technological options available to them; for instance, "Indian manufacturers have, generally, been quite aware of major innovations abroad and quick to take licenses" [18, p. 70]. They often entered into careful negotiations with the suppliers for favourable terms and conditions. A significant number of recipients in fact had greater experience of technology negotiations than many suppliers when the latter were smaller and without previous international experience [6, p. 41].

Thus, the idea of disadvantaged, weak, and inexperienced developing country firms needs to be qualified. Clearly, a large number of firms from the more industrialized developing countries undertake careful searches and negotiate hard over terms, especially price. Their share undoubtedly used to be smaller and is still small in the less industrialized countries.

But a more pervasive problem is that they often do not make the most of the technological knowledge made available. Bell and Scott-Kemmis [6, pp. 97-99] found in their sample of Indo-British collaborations that in 40 per cent of the cases, the suppliers believed that the recipients did not absorb the know-how made available. In one case "[the recipients] made a bit of effort," but "they wanted to make money without becoming a machinery engineering company" and "cut costs on training at all corners." In another, "they did not realize how much technology there was to absorb." A recipient states, "we under estimated how much specialized knowledge was needed" [6, p. 98].

Technology transfer is meant to provide technical knowledge lacking in a specific production environment. Training is therefore extremely important, yet this is frequently underemphasized or ignored by recipient firms and countries. For instance, in a study of over 600 petroleum exploration contracts, only 14 per cent made any provisions regarding training, employment of nationals, and local technical services [67]. Contracts in later periods were more explicit about the need for such provisions suggesting that recipients had learned from experience. Thus we see that recipient firms and countries have all too often been unaware of their needs or unwilling to make the necessary effort towards acquiring the know-how.

Factors affecting technology transfer: New findings

The developments of the 1970s, the increased confrontations on issues of technology, and the high level of policy attention paid to the issues catalysed a number of new studies on technology transfer. The newer studies attempted to elaborate further the characteristics of the technology supplier, the recipient, and national policies and their impact. The studies attempted to examine the similarities and differences in the process by sector, by underlying firm strategies of the recipient and supplier, according to the elements of technology transferred, and the nature and amounts of payments. Finally, greater efforts were made to understand the implications of the above variables and policy choices for the economic development objectives. The 1980s saw a large number of case-studies that attempted increasingly to determine associations between the processes, the factors underlying the processes, the macroeconomic variables, and government policies, characteristics of the main agents with the "success" or "failure" of technology transfer. But then what do we mean by success?

Many definitions, concepts, and measures are used to determine success, varying in breadth and relevance. Owing to difficulties of measurement and aggregation, success or failure of technology transfer is in general more amenable to individual case-study analysis, and most aggregate, macro indicators have serious limitations.

In any transfer of technology, the prime objective is to transfer production knowledge from one location to another in order to undertake specific production activities; the amount of output made possible is therefore one measure of success. In addition, it is obviously important to examine the efficiency achieved in the new production process in terms of materials and energy used, the productivity of labour and machinery, and to compare the efficiency levels with relevant norms of best practice elsewhere, supplier standards, or with designed levels.

It would generally be agreed that a movement towards local integration represents a successful example of technology transfer, so that there should be an assessment of how far the new facility has been able to replace imported elements over time. Clearly a transfer that creates an efficient production facility using 100 per cent imported inputs of raw materials, skilled personnel, and know-how is significantly different from one that is at the other extreme. Then, since there should be improvements in efficiency, local content, and technological capabilities over time, we need to analyse the speed with which "success" is achieved. As these factors are also evolving in other countries, one may wish to compare whether and at what rate the recipient is able to maintain or reduce the gaps between local performance levels and rising world standards. For any economic conclusions to be drawn we need to know the magnitude of the costs incurred and benefits derived, plus those of alternative courses of action. And finally, since at least two parties are involved, we need estimates of the costs and benefits to each party and their degree of "reasonableness" and "equity."

The evidence clearly supports the view that the greater the involvement of the supplier and the recipient, the more successful the technology transfer. At the simplest level, when the recipient is a wholly owned subsidiary, the supplier has the highest potential total return, the minimum divergence of views, procedures, and objectives between the two parties and the minimum threat to future markets, so it can more easily transfer explicit, codified, and documented technical elements as well as the more implicit, uncodified human embodied elements of knowledge. The situation is similar if the supplier owns a significant amount of equity in a joint venture. In such situations, the evidence suggests that technology transfer to the point of establishing efficient production facilities is most likely to be successful with larger equity participation by the supplier. The recipient then also has access to the ongoing results of technical change and innovation available to the supplier [23, 19, 30]. On the other hand, although firms owned by multinationals are usually more efficient [62], there is general agreement that other aspects, such as knowledge and capability related to investment, expansion, and innovations, are stunted where there is excessive foreign control.

Production efficiency, as we shall see with other aspects of technology transfer, is highly correlated with the macroeconomic policies and market structures of the recipient country. If the recipient environment does not promote competition but protects inefficient production, outdated processes, and products, then all forms of transfer can be seen to perform poorly when production rates, efficiencies, and costs are compared with other more competitive environments. For instance, a survey of technology transfer in the textile sector in a number of African countries illustrates "the pivotal importance to which changes in competitive structures or in state policies are translated into a need to reduce costs of production" [43]. Again, in a situation of larger macroeconomic problems, variables affecting individual performance tend to get submerged. A 1985 survey of 343 manufacturing firms, most involving technology transfer both in the initial stages and often subsequently, showed that 23 per cent of them had stopped production and 57 per cent were producing at levels below their break-even point [44]. Adei [1] provides a case-study of a tyre plant in Ghana where so little production technology was transferred that, with the departure of the expatriates, plant operating levels fell to 10-20 per cent of capacity. Similarly, Lall [34], Desai [19], and others have pointed out that the excessive protection and regulations in the Indian environment reduce both incentives and opportunities for efficient production, so that Nath [45] found little change after transfer in the production performance of a group of firms that could be attributed to characteristics of the technology transfer.

With regard to the "appropriateness" of the original technology and the extent to which the technology provided is modified by the supplier to take into account different market size, factor costs, and resource endowments, it does not appear that the effects of technology transfer arise from form and ownership. In general, when the recipient market is considerably smaller, most suppliers and recipients try to make adjustments to the production technology as currently used by the supplier. This is sometimes achieved by transferring earlier vintages of the production technology used when the market in the supplier country was smaller. In some cases scaling down poses few problems, and specific exercises are undertaken for this purpose. Frequently the peripheral processes such as packing, transport, and materials handling are adapted to suit recipient capital and labour costs. Small modifications to adapt the process and machinery to the characteristics of local inputs are made less often.

Such attempts impose additional costs, require greater involvement on the part of the supplier, and greater capacity on the part of the recipient to suggest, participate in, and contribute to any modifications. A supplier that has already gained experience in adapting technologies, or that expects increased sales in the future as a result, will have greater capacity for and interest in undertaking these activities. All these factors imply that lower payments for technology, small size of suppliers, and lack of experience in other transfers will tend to inhibit modifications to the technology to make it more appropriate for the recipient economy. The evidence in Bell and Scott-Kemmis [6], Niosi and Rivard [47], and others confirms that larger, more experienced firms tend to make more adaptations, provided the direct or expected returns to them justify their additional costs. The evidence also suggests that these factors provide only the necessary conditions for adaptations of technology; the chances of their actually taking place depend heavily on the recipient's macroeconomic environment, with greater competition forcing adjustments to be made. Policy environments that require domestic inputs to be used increase the need for adaptations, and greater recipient technological capacity improves the likelihood of successful adaptation.

It is probably owing to the combined effect of these variables that Reddy and Zhao [56], in their review of evidence for capital intensity of technologies and that of adaptations (if any) by supplier characteristics, find contradictory indications. Some studies find that multinationals are more likely to use labour-intensive technologies and others find the opposite to be true. Some suggest that multinationals are more willing and able to adapt technologies while others do not. Clearly, specifying the problem by supplier characteristics alone is insufficient.

The changing economic, technological, and policy environments

There is little disagreement regarding some recent trends in the world economy and their effects on issues of technology transfer; regarding others, however, there is ambiguity. The 1980s have seen a period of slow-down in the rates of world economic growth and of growth in trade, although trade growth is still far faster than economic growth, making competitiveness an important issue for all economies.

The operations of multinationals continue to grow, and they account for an even larger percentage of world production, trade, and employment than earlier. The ratio of intra-firm trade, which imposes special difficulties for national control, has increased and amounts to almost a third of all international trade. The multinationals invest larger amounts in R&D and have increased control over the research of smaller firms through takeovers.

At the same time, there is a trend towards higher rates of technical change and so larger investments are required to keep abreast of technology. The investment costs for successful innovations appear to be rising in many sectors. All of these factors have made technology a more important strategic element for firms.

For developing countries, these trends create increased barriers in some instances and increased scope in others for technology transfer. Increased scope is available from the greater number of technology suppliers and the sharper competition between suppliers. Larger numbers and sources allow developing countries to extend their options and obtain better terms; the evidence also suggests that multinationals have become more flexible and accommodating to some demands from developing countries. Willingness to transfer core technology and skills is increasingly a condition for multinationals to win contracts and is more often accorded.

At the same time, new barriers are emerging due to fiercer competition, more rapid rates of technical change, the need to have access to wider elements of knowledge for successful product and process innovation, and the need to reduce risks from higher investments. These have forced groups of firms to increase cooperative activities in technological development and production. This is shown in the increasing rates of cross-licensing of patents, joint R&D, more joint venture partnerships, and new forms of product and process development partnerships between firms simultaneously competing in other (and even related) sectors. Furthermore, the directions of technical change have cut direct labour costs in many sectors, and to that extent have reduced the attraction of developing countries as low wage manufacturing locations. The developing countries that are attractive for foreign companies are those with large markets, such as India; close to major industrial countries, such as Mexico; and those with high growth rates, strong technological capacity, and a skilled labour force, as in East Asia.

On the other hand, economic growth in Latin America and Africa has been poor to uneven. The large debt burden has been a major drag on growth for many countries. Low growth and high debts have reduced capital flows and made foreign exchange increasingly scarce. This has reduced the inflows of foreign direct investments imports of capital goods and machinery, technical assistance, and foreign training- all important channels for technology transfer. We have at this time almost no information on how this reduction and the other global changes have affected other issues connected with technology transfer and its effects on technological capability at the firm and national levels. These trends suggest that if developing countries were ever a homogeneous group in the past, they are certainly much less so now. The "particularities" of the countries require increased particularity of analysis and policy response.

The combined effects of the diminished resource capacity of many developing countries, the greater need to attract capital flows, a recognition that regulations in the earlier period were often carried too far, and the growing threat of increased technological gaps have forced most developing countries to a degree of liberalization of technology import policies. There are good reasons for a shift away from excessive regulation, but without thereby implying that no regulations were necessary.

The 1980s saw a complete swing of the pendulum, with the triumph in the North of the view that all regulations by the state were necessarily imperfect and could not improve upon even imperfectly functioning markets. This "triumph," of what Hirschman calls "monoeconomics" and "the conviction with which the advantages of the invisible hand, and the disadvantages of the visible hand, were sought to be imposed on the faithless infidels whenever possible" (Jagdish Bhagwati), contradicts much of the evidence on developing technological capability. In the South the view had to be accepted under straitened circumstances.

In this context, the issues of unequal exchange disappeared from the international fore until a new round of bargaining to share environmental resources surfaced in the international agenda. It is interesting to note that besides all the other changes noted here, the newly perceived global environmental threats and the need to find common ground between the North and the South to confront these dangers have again forced a reappearance of the divergent views on issues of technology and its transfer to the top of the international agenda. Unfortunately, at this time both the North and the South appear locked in a sterile replay of the unresolved issues from the Code of Conduct negotiations of the 1970s, while Northern trends towards extending private property rights in completely new areas are raising a host of new concerns [55].

Concluding remarks

In some ways, excessive politicization of the issues has definitely been harmful to the interests of developing countries. It is argued that the antimultinational rhetoric of many countries in the 1970s scared foreign investors away, leading to lower rates of foreign direct investment in later years [36]. I would suggest that, in the 1970s, the availability of loans in the international market and, in the 1980s, the increased prospects from investments in the industrialized countries and the debt crisis have been the dominant factors affecting foreign direct investment. Nevertheless, the nationalist policies certainly scared away investments in the primary sector in many countries, leading to a reduced role for multinationals. This had the perverse effect that while their market share increased, the unit prices declined. Furthermore, this forced the metals companies to move downstream and increase the technology intensity of their own activities [54, pp. 25-26]. Inefficient regulatory processes? leading to long delays in approval of technology agreements, are cited by technology suppliers in an OECD survey as the most important impediment.

In short, developing countries face a dilemma. Strict controls on technology transfer can and have improved the terms and conditions on which technology is available. They have also reduced considerably the extent of unfair restrictions imposed by suppliers. But at the same time, the regulations have reduced access by developing countries qualitatively and quantitatively to the range of technologies available to them. Cooper and Sercovitch [17] had cautioned that it would be too much to expect technology policies to resolve all dilemmas confronting the developing countries. But certainly countries that have relied on excessively defensive approaches, have placed an overriding emphasis on costs and neglected technological elements, have been concerned more with short-term production transfers than with longer term capacity building, have directed policies more towards external constraints than internal - all combined with inefficient implementation - have only accentuated their dilemmas. I have mentioned the dramatic changes in the international economic, technological, and political environment and the fact that we are woefully short on more recent studies on technology transfer to developing countries in the context of the revised framework and the new context. However, I am confident that neither "monoeconomic" nor "autarchic" policies will provide ways out of the dilemma; instead, appropriate policy balances have to be sought in each country.

Contents - Previous - Next