GLOBAL BUSINESS, TECHNOLOGY AND KNOWLEDGE SHARING Strategies for Developing Countries

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GLOBAL BUSINESS, TECHNOLOGYAND KNOWLEDGE
SHARINGStrategies for Developing Countries
UNCSDT Panel Meeting - Colombo, Sri
Lanka October, 15, 2002 N. S. Siddharthan Institu
te of Economic Growth Delhi University, Delhi
110007, India E-Mail nss_at_ieg.ernet.in
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The following presentation is based on my recent
book Global Business, Technology and Knowledge
SharingLessons for Developing Country
Enterprises N. S. Siddharthan and Y. S.
Rajan Published by Macmillan, New Delhi, 2002
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THE MAIN IDEA
? Central role of knowledge in determining the
firm's competitiveness ? Multilateral
liberalization of international trade and
investment policies Their influence on ?
Creation and diffusion of new knowledge
? Location of RD and production
facilities ? Preference for mergers and
acquisitions ? Shared creation and
commercialisation of knowledge The role of
technology intermediation
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BACKGROUND FEATURES The changed global
business scene ? World Trade Organisation ?
Changes in the communications and information
technology ? Short product life cycles - Rapid
obsolescence of products ? Increasing importance
of the SMEs Consequences ? Need for
technology intermediation ? Importance of
sharing of intangible assets rather than
unidirectional technology transfer Mere
transfer of blue prints cannot transfer emerging
technologies. It is a process that involves
joint efforts at adaptation modification to
suit the local conditions cannot be done by one
partner.
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WTO
National Treatment Most Favoured Nation
Status Remove Import Quotas Reduce Import
Tariffs Intellectual Property Protection FDI
Removal of Export Obligations, Domestic
Component Requirements, Foreign Exchange Balance
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Earlier Technology Mass Production of One
Model Current Technology Flexible Manufacturing
Systems Frequent Changes in Product Mix Frequent
Changes in Designs Small and Medium High-tech RD
Units Web sites and E-commerce and
business Changing role of SMEs Customerised
Products Specialisation Subcontracting CNC
Machines
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FDI Paradox Leontief Paradox Resource Endowments
and Trade in Goods FDI Paradox More than 60 FDI
inflow to Developed Countries Technology
Transfer 88 of Royalty Payments Among Developed
Countries Less Developed Countries get less FDI
and Technology
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FDI LOCATION ADVANTAGES MARKET SEEKING Size,
Income and Growth Rate Membership of Regional
Union EFFICIENCY SEEKING Cost Labour and
Skill (In empirical studies cheap labour has not
emerged significant) Infrastructure Transport,
Telecommunications, Electricity, Port
facilities Customs, Legal Dispute Settlements,
Rule of Law OTHER LOCATION ADVANTAGES Technologic
al Status Brand Name and Goodwill of Local
Firms Openness of the Economy (This has also not
emerged important) Trade Macro Policies of the
Government IPR ( In studies this variable is also
unimportant)
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Mergers Acquisitions
IMPORTANCE Majority owned M A account for 60
of FDI MAIN CAUSES Liberalised Trade Regime
Relocation of Manufacturing Units Impact of ICT
Technology Customerisation, Diversification of
Component Sourcing Efficiency Seeking FDI
Importance of Speed of Entry CONSEQUENCES Green
Field Investments add to Capital Stock Stronger
firms take-over weaker loss making ones Weaker
firms could have closed down but for MA Heavy
investments and technology transfer Hence not
different from green field PROBLEMS Market
concentration, monopoly and entry barriers
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FDI in R D
Enhancing the RD base Home base
augmenting/exploiting Skill intensity Make or buy
decisions Acquisition of RD intensive firms
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TECHNOLOGY IMPORTS ANDIN-HOUSE INNOVATIVE
ACTIVITIES
Substitute Or Complementary? Innovative and
Adaptive RD Technological Paradigms and
Trajectories
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Tech Intermediation Late comer firms can
compress the cycle Late-comer advantages and
leap-frog Role of MITI and other agencies. In
the current age replication of earlier models
not possible Character of New
Technologies Several Channels and Multiple
Receiving Points Role of Government From
Controller to Network Supporter and
facilitator SMEs and Tech Intermediation
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Technology intermediation cannot be looked at as
the one-way linear technology transfer It is a
knowledge network backed up with technology
forecasting and assessment, and use of
information about technologies to create a
mutually supporting flow. New
technologiesadoption and assimilation occur at
multiple receiving points and via several
channels Nurturing of the multiplicity of
channels, not the hierarchy of the technology
transfer channels, which is the concern of
policy
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FUTURE SCENE Enterprises and Nations Trade
Theories Enterprises in a nation behave alike,
equal access to knowledge. Knowledge is not a
free good It involves search, acquisition and
assimilation costs The costs depend on the
initial knowledge base of the enterprises. Hence,
enterprises in a given country and industry
differ with regard to their ownership of
intangible assets. Intra-firm technological
diversity The ongoing technological revolution
Information and knowledge intensive and not
materials intensive. Unlike knowledge based
industries resource based ones are country
specific Endowments of enterprises, as distinct
from endowments of countries
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CHANGING ROLE OF ENTERPRISES International
Currency Market Currency portfolios of firms
have already become global FDI, technology
augmenting investments aimed at exploiting the
host country resource (including knowledge base
and human skills) advantages. Virtual work
stations and virtual labour mobility Global RD
units, independence from the home firms
control RD creation and transfer in cyber space
Increase in intrafirm trade and decrease in
market transactions From MNEs to Global Firms
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THE ROLE OF THE STATE From Controller to
Facilitator Instruments Creating an atmosphere
for free flow of Information, knowledge and
goods Institutional reforms aimed at
removing Corruption, delays (at customs, ports
and law courts) Role of Monopoly, Accountability
Transparency Promoting networking among firms
and individuals Promotion of infra structrure
including skill levels Strict enforcement of the
rule of law Small and effective government vs.
Large and rent seeking one