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1. The separate question of whether it is predominantly supply- or demand-side factors that determine diffusion is not, however, addressed.

2. See also O'Connor (1985b).

3. See Table 2 in Castells and Tyson (1988).

4. For a general discussion of this approach see Stewart (1982).

5. It is useful to recall here that 'in the past two decades the prime motive of direct foreign investment by transnationals in the Third World has been to secure the protected markets of these economies' (Nayyar, 1978, p. 772).

6. Vernon notes that this type of behaviour can occur even when import protection is not guaranteed. In particular, 'when the basis for an oligopoly is product and brand differentiation, as in food preparations and in drugs, the production facility that is in closest contact with the market generally operates at a major advantage over the others. As a result, if a leading competitor improves its contacts with the market by establishing a local production unit, others in the industry may feel threatened; hence the tendency to follow the leader' (demon, 1973, p. 22).

7. The general point is nude in Hood and Young (1979).

8. Research by Reuber et al. (1973), which showed a strong positive correlation between the stock of foreign investment per head and gross national product per capita in developing countries, is worth noting in this context.

9. Many of these countries were among the world's fastest growing import markets in the late 1970s, according to a table presented by Ernst (1983, p. 153).

10. This example is interesting also in showing how supply-side factors may, in reality, be prompted by initiatives on the side of demand.

11. O'Connor, for example, contends that 'Developed country electronics firms are frequently unwilling to license their state-of-the-art technologies due to their concern that by so doing they could undermine their own competitive advantage' (O'Connor, 1985b, p. 42).

12. Plesch (1979, p. 87) cites numerous examples to support these conclusions.

13. This reason also appears to underlie the subcontracting relationships between firms in developed countries and local software institutes in developing countries. Indeed, partnerships or subcontracting arrangements are said to be 'the most common form of software-related activity undertaken by developed country-based computer firms in developing country markets. For, a TNC is not likely to make sizeable investments in its own software development subsidiary for a particular national market unless that market is sufficiently large to warrant it' (O'Connor, 1985a, p. 320).

14. See also Humbert (1988, p. 155).

15. The ineffectiveness of legal protection against copying and use of computer software is also a much discussed subject (Correct, 1985; Narasimhan, 1985), but it is not clear to what extent copying actually occurs in the Third World.

16. Evans also makes the important point that if IBM, Burroughs, or Digital had been the innovators of the microprocessor, they would have accordingly had a 'strong interest in restricting their use by third parties' (Evans, 1985, p. 21).

17. It is worth noting that the 'counterfeit' Apples produced by some Asian firms have been pursued legally by Apple Computer, which was able to have thousands of 'look-alikes' confiscated at ports in the United States. Apparently as a result, 'Taiwanese microcomputer manufacturers have begun to focus their efforts on developing and manufacturing IBM PC compatible systems, seeking to avoid legal problems by arranging to license IBM's operating system, design their own hardware, and write their own software onto memory chips' (O'Connor, 1985b, footnotes).

18. As measured by state ownership, the role of the state is especially pronounced in Africa. The public sector in Africa contributed no less than 33 % of investments in the 1970s (Hawkins, 1986) and the figure remains high even today.

19. See Stewart (1987) for a full discussion.

20. Though, of course, there will be overlapping demands (such as for computers), and hybridous cases (such as when the government decides to adopt a digital telecommunications network and individuals decide on the extent to which they will use it).

21. According to one estimate, for example, purchases by public administrations exceed 40% of the total demand for electronics in Latin America. See Lahera and Nochteff (1983) and Correa (1989). A study of computerization in Indonesia found that 'the Government and quasi Government agencies have always been the dominant user of computers' (Pesik, 1981, p. 128). For some African evidence see Obudho and Taylor (1977)

22. Among the many references on applications are Munasinghe et al. (1985); Obudho and Taylor (1977); Teoh and Rasiah (1984); Tottle (1984); Bennett and Kalman (1981); Damachi et al. (1987); and Munasinghe (1989).

23. To support their contention, these authors point to the large numbers of different (and mostly incompatible) types of models purchased by public administration in at least one Latin American country.

24. Landes (1969, p. 542) makes a lot of relative factor cost differentials in explaining why the early follower countries took so long to assimilate the innovations of the Industrial Revolution.

25. Bhalla and J. James (1986, p. 160) quote Howard Pack to the effect that in the weaving industry 'research on improving production has not led to equipment that dictates the disregard of older methods of production in the developing countries'.

26. See Mody and Wheeler (1990) for some estimates of the extent of gains that are likely from these two sources.

27. For a discussion of skill requirements in relation to computer-aided design, see Kaplinsky (1982a), and in relation to four flexible automation techniques see Edquist and Jacobsson (1988).

28. Telecommunications appears to be exceptional in this respect, since 'in tropical and inhospitable climates solid state, digital equipment requires less maintenance than electromechanical technology which requires a high degree of insulation from the outside environment' (or 'tropicalization') (Hobday, 1986a, pp. 28-29).

29. The product quality argument itself contains no obvious bias in its implications for the income level of the adopting country, since many of the products are exported. There may, however, be a positive correlation with growth rates insofar as the latter are enhanced by outward-looking strategies (Chenery and Keesing, 1979). The growth-enhancing effects of such strategies have been examined in detail in the World Development Report, of the World Bank in 1987.

30. For the case of computers in Latin America, see Correa (1989) and with respect to microelectronics-based industrial machinery in the Association of Southeast Asian Nations (ASEAN) region, see Onn (1989).

31. See, for example, the demand for electronics products in Ethiopia as reported in Degefu (1985).

32. Kaplinsky's review of the employment effects of new technologies for the International Labour Organization concludes that 'although there has been extensive literature on the linkage between the new technology and employment in the industrially advanced economies the debate has, with the partial exception of Brazil, barely been raised d all with respect to developing countries, especially those with low-incomes and predominantly agricultural populations' (1987, p. 145). Another exceptional case is the study of the Philippines by Palafox and Casel (1985).

33. The model employs parameter values based on estimates for Japan in three different periods, namely, 1880, 1930, and 1960. See Binswanger (1980).

34. In the simplest dual-economy formulation, where labour-saving technical change occurs in the modem sector, the effect (unless output increases sufficiently rapidly) would be to postpone the 'fuming-point' (i.e., the point at which the labour force in the nonmodern sector begins to decline). Calculations conducted by Birdsall provide some sense of the likely orders of magnitude of such postponement for selected countries. On the basis of assumptions about probable rates of population growth, she shows that a reduction in the demand for labour by the modem sector from 4 to 2 per cent per annum (due, we assume, to the effect of labour-saving technical change in the modem sector) would postpone the fuming point by an average of about twenty years for the particular sample of countries. See Birdsall (1984).

35. Johnston and Kilby (1975) give a detailed discussion of how technical change affects the rate of population growth.

36. There is a brief allusion to this question in the debate between Hall and Heffernan (1985) and Hagen (1982, 1985).

37. This discussion draws heavily on James (1985).

38. The plea for more attention to economy-wide effects that has formed a major theme of this section is also made by Lipton and Longhurst (1989) in the context of assessing the impact of the new varieties on the poor. One of the few studies of the rural sector with an economy-wide focus is that by Bell et al. (1982). Their investigation of the impact of the Muda project in Malaysia revealed sizeable effects on the national economy: for every dollar of value added that was generated directly by the project, approximately another 80 cents were generated indirectly.

39. In practice, of course, the two concerns are related: impacts on developing countries depend not only on the degree to which the countries embrace the new technologies but also on the patterns of adoption and diffusion in the rich countries. Ideally, therefore both issues should be tackled simultaneously in a systems-analytical framework. One approach of this kind is the global modelling exercise conducted by Bessant and Cole (1985). The demands of this level of aggregation, however, require the authors to make a set of often unrealistic assumptions.

40. This is an important focus of much of the literature on the Green Revolution. See, for example, Scobie (1979) and Binswanger (1980).

41. In some of the more extreme statements of this concern, the reversal of comparative advantage based on cheap labour (to which automation would give rise) would manifest itself in the sizeable and rapid relocation of export-oriented foreign investment to the developed countries. Rada (1980, p. 106) has observed that 'some key industries are resuming to the developed countries'. More recently, in an UNCTAD document it was noted that 'many offshore assembly operations of transnational corporations that were previously profitable in developing countries, mainly because of low absolute costs of both unskilled and skilled labour, are now being transferred back to the home country or other developed countries to take advantage of contiguity to markets and of cost economies arising from the centralised location of production operations made possible by automation. The risk of a shift in comparative advantage away from developing countries reflects not only labour cost reduction but also the improved quality which automation permits' (UNCTAD, 1984, p. 22).

42. Although in some developing countries, factor prices may be 'distorted' enough (through, for example, minimum wage legislation and subsidies on capital) to make the new techniques as profitable to the private sector as in developed economies. Moreover, even if this is not the case, there may be developing countries that are capable of adapting the new techniques to their own factor endowments and prices.

43. The new technology may, of course, require less per unit of output (as well as less labour per unit). As long as the proportionate saving in capital requirement is less than that of labour, the optimal capital-labour ratio rises as a result of technical change, which is then defined as labour-saving in a Hicksian sense. See Binswanger and Ruttan (1978).

44. The concentration of manufactured exports from the Third World among the East Asian NICs is shown in Keesing (1979). For 1975, for example, the share of Hong Kong, Taiwan, and South Korea in this total amounted to nearly 40X.

45. This possibility is acknowledged by Kaplinsky (1986, p. 45), who suggests that the more 'class-ridden' of the developed countries will tend to suffer from it since they are least able to accommodate the new labour process. See also Hoffman and Kaplinsky (1988).

46. For a detailed, empirical assessment of this tendency see Mody and Wheeler (1990). According to these authors, the competitiveness of the NICs in the U.S. market for textiles and garments is likely to be threatened during the next decade not only by U.S./Caribbean joint operations but also by low-cost production in China.

47. As noted for example by Castells and Tyson (1988). Much depends, of course, on factors other than the technical change itself. For example, as O'Connor has pointed out, 'Factors like the protectionist policies of the OECD countries-and realignments of international exchange rates have had more profound implications for the second-tier NICs' economies in recent years than technological developments per se' (O'Connor, 1989, p. 3). The political economy of protectionism is discussed in many sectoral studies (such as Hoffman and Rush, 1988; Hoffman and Kaplinsky, 1988; Mody and Wheeler, 1990). Kaplinsky (1989) discusses the factors that tend to make protectionism more severe in some sectors than others.

48. Tigre's (1983) study of technology and competition in the Brazilian computer industry for example, shows how entry barriers were created for domestic producers by the goodwill that the large multinational firms were able to engender for their own trademarks.

49. A point that is recognized by Mody and Wheeler (1990), who attempt to specify some differences in the characteristics of the products with which they are concerned.

50. See Keesing (1979). It is perhaps worth noting, in this context, that South-South trade in manufactures accounted for 36X of manufactured exports from the South to the world in 1979 (see Amsden, 1983).

51. This distinction is suggested by the earlier discussion on diffusion, although the data required to quantify it precisely are not available.

52. In relation to developed countries, Northcott (1985) points out that the reliance on suppliers is especially important for the smallest establishments.

53. Carroll (1985), however, suggests that as a result of a combination of expanded manufacturer and distributor outlets, and the provision of repair facilities in some major cities, the servicing of microcomputers is becoming more widespread in the Third World (though, as he also notes, it 'remains expensive').

54. Schware and Trembour (1985, p. 17) describe in detail an aid project, that, 'by its own assessment ... left behind ill-trained operators and a computer system that remained inadequately installed'. See also the report on computers in Sri Lanka by UNDP/ILO (1982).

55. As noted above. For a detailed discussion, see Edquist and Jacobsson (1988).

56. Khanna (1986) notes the presence of this problem in the early Chinese experience with the acquisition of foreign technology.

57. O'Connor (1985b) does, however, also observe that investments in semiconductor assembly in large markets are often followed with a lag by backward integration into wafer processing.

58. Tigre's study of computers in Brazil, for example, finds no evidence 'to support the hypothesis that majority local ownership in overseas subsidiaries facilitates technology transfer through access to technical knowledge generated abroad. On the contrary ... even majority local partnership in overseas subsidiaries of MNCs does not favour technology transfer' (Tigre, 1983, p. 89).

59. The government may, for example, be in a more monopsonistic situation in the telecommunications sector. This tends to strengthen its bargaining position with respect to the subsidiaries. See Hobday (1986b).

60. We consider below the nature of the innovations to which these capabilities gave rise: whether, for example, they were more appropriate to local conditions that imported technologies.

61. Evans (1985) and Grieco (1984) for Brazil and India, respectively.

62. Both Evans and Grieco raise, in an extremely interesting way, the issue of how their findings challenge the tenets of dependency theory.

63. Grieco's description of the evolution of the computer industry in Nigeria and Indonesia lends powerful support to this conclusion. He shows that these countries, unlike India and Brazil, did not formulate policies that enabled them 'to take advantage of international computer developments'. As a result, 'in Indonesia there was no sign at the end of the 1970s that an indigenous systems-engineering industry would soon emerge, and in Nigeria only one five-person firm ... had emerged to fabricate a few small ($1,000) micro-systems' (1984, p. 164).

64. A more extensive list of references on this subject would include Göransson (1984), Hoffman (1984), Erber (1985), Jacobsson and Sigurdson (1983), Nochteff (1985), O'Connor (1985b), Fransman (1986a), Junne (1986), Khanna (1986), Edquist and Jacobsson (1988), Mody (1989), Henderson (1989), Evans and Tigre (1989).

65. The distinction between direct and indirect forms of government influence on technology decisions is made by Stewart (1987).

66. In the context of microelectronics, O'Connor (1985b, p. 6) makes the interesting observation that 'countries whose industries are more export oriented tend to have a product mix more heavily weighted toward consumer electronics goods than those countries producing electronics goods largely for the domestic market'. There is also some evidence that the electronics sector in large, inward-looking countries, such as India and China, suffers from low-quality products. See Grieco (1984) and Sigurdson and Bhargava (1983).

67. This type of orientation of the export trade of East Asian NICs seems to apply quite generally. See Chenery and Keesing (1979).

68. It is these types of innovations that seem to have accounted for a good deal of technical change in the general development of the East Asian NICs. See, for example, Johnston and Kilby (1975).

69. Many of these areas are known to economists as 'public goods' (i.e., goods whose benefits are not reduced by an additional user and for which it is difficult to exclude people from its benefits, whether or not they are willing to pay).

70. These examples are contained in Bhalla and James (1988). Other useful cases are described in Munasinghe et al. (1985), Bhalla et al. (1984), Obudho and Taylor (1977), Kaplinsky (1990).

71. In the context of microelectronics, the strength of political economy factors is suggested in Hobday's study of telecommunications in Brazil. He shows that 'rural and regional TC [telecommunications] have not progressed to anywhere near the same level of coverage or quality as the major industrial centres or the capital Brasilia' (1986b, p. 232). He views this neglect of the rural areas as 'part of the wider problem of underdevelopment and inequality in Brazil'.

72. There are, of course, exceptions to this characterization. Hobday's (1986b) study of Brazil, for example, soars to assess the costs and benefits to that country of investment in telecommunications technology and infrastructure.

73. See Kaplinsky (1990), Schmitz (1990), and Rosenberg (1988) for a discussion of these features of new technologies.

74. In the case of relatively poor developing countries, for example, it could be argued that domestic market 'niches' of the kind identified by Maxwell are less apparent. To this extent, the potential afforded by the small scale of some microelectronics production will be less available for exploitation. Problems may, of course, also arise on the supply side to limit the general applicability of this type of production.

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