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The political economy of development
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15. An overall review of the development process
16. The impact of TNCs on development: some general considerations
17. The transfer of technology: host country perspective (a)
18. The transfer of technology: host country perspective (b) 
19. The transfer of technology: a home country perspective
20. The transfer of capital, management skills and entrepreneuship:
    the provision of markets


15. An overall review of the development process

15.1 introduction: alternative concepts of economic development
    a) historical approaches and different indicators (GDP per
       head, GNP per head, income distribution, quality of life)

    b) balanced and unbalanced growth

    c) dependencia (Cardoso and Faletto 1979) vs. neo-classical views
       on development

    d) the structuralist approach (Chenery 1979, 1986)

    e) forms of growth: dynamic vs. static comparative advantage

15.2 comparative levels of economic development and types of
     developmental paths
    a) levels of economic development (as measured by per capita
       income, economic structure, housing, education, health care,
       etc.) and changes in these over the last two decades

    b) an analysis of alternative development strategies (see
       especially Cherry, Robinson and Syrquin (1986) and World
       Bank (1987); and how views on these have changed over the
       past twenty years or so -since the late 1960s)
      i) primary goods specialisation
     ii) import substituting industrialisation
    iii) balanced production and trade
         - first stage: non durable goods
         - second stage: durable goods
     iv) outward oriented i.e. export led industrialisation

    c) the contribution of trade and international resource
       transfers and TNCs to promoting the development strategies
       identified in b) (see especially ECE/UNCTC 1984)

15.3 the role of TNCs
    a) potential contribution to mobilisation and allocation of
       productive resources
      i) the contribution of external resources to filling
          (a) the resource gap
          (b) the foreign exchange gap
          (c) the budgetary gap
          (d) the management, technology and technology gap

    b) potential conflict between the allocation of resources
       desired by TNCs and national development needs; the
       structuralist/dependency perspective

    c) the cultural dimension; the inability of economic analysis
       to explain certain aspects of TNC behaviour in developing
       countries or reaction to that behaviour
Streeten in Dunning ed.(1974)
Chenery(1979) Cherry, Robinson and Syrquin(1986) Balassa(1980)
World Bank: World Development Report (annual)
Lall and Streeten (1977)
Frank(1980) Cardoso and Faletto (1979)
UNCTAD: Trade and Development Reports (annual)
BID: annual reports
CEPAL: Estudio Economico de America Latina (anuales)
ECE/UNCTC (1984)              See Bibliography

16. The impact of TNCs on development: some general considerations

16.1 Introduction: establishing the perspective
    a) from which or whose point of view is the impact being assessed
       - e.g. the home or host country, a region, the world economy,
       a particular industrial sectoral or interest groups (e.g.
       competitors, consumers, environmentalists, labour, the economic
       elite, political lobbyists etc)? With what time perspective has
       the impact been considered? Is the impact assessed EX ANTE or
       EX POST (i.e., in terms of project appraisal or evaluating it
       with a historical perspective?

    b) what particular effects are the subject of concern -e.g. balance
       of payments, income distribution, employment and training,
       economic sovereignty, consumption patterns, regional development,
       cultural identity, industrial performance, technological
       capability, collective self reliance?

    c) which TNCs are of concern e.g. all TNCs, TNCs from particular
       countries, those of a particular size, those pursuing globally
       oriented production strategies or participating in certain

16.2 TNC/Nation State interaction
     a) national policies towards TNCs (including both the explicit
        ones and those resulting from other macro-economic, trade
        and industrial policies) depend on:
       i) the evolving goals of the Nation States and the way in
          which the government bureaucracy interpret and apply
          them (e.g. as illustrated in 16.1b and the trade offs
          between them in conflict situations; e.g. export
          generation v. regional development; upgrading of industrial
          efficiency v. self reliance, employment generation v.
          obtaining up-to-date technology
      ii) how TNCs are perceived to affect these goals
     iii) how states evaluate their capacities to negotiate and
          bargain with TNCs
      iv) the ability and willingness of States to adopt macro
          and micro economic policies most suited to their 
          developmental needs, taking account of the presence,
          or potential presence of TNCs

    b) TNCs and their impact on the extent and form of global
       economic interdependence and the structure of international

    c) the role of international codes and other multilateral
       arrangements on TNC/Nation State interaction

16.3 TNCs and indigeneous firms
    a) the resources (assets) e.g. capital, technology, management
       skills, entrepreneurship, markets etc. - privided by TNCs vs.
       indigeneous firms

    b) the control exercised over the use of these and other 
       resources acquired by TNCs -particularly by corporations
       pursuing integrated production and marketing strategies

    c) the distribution of the benefits of TNC activities
      i) differences in allocative and sectoral efficiency
         between TNCs and other firms
     ii) differences in goods and services produced by the two
         groups of firms

    d) the concept of Local Value Added (LVA) and its determinants;
       how TNCs cf. indigenous firms, may affect LVA

    e) differences in the responsiveness of TNC affiliates cf.
       indigenous firms, to host government policies

    f) the political and cultural impact of TNCs and/or their

16.4 structural determinants of impacts (a checklist)
    a) industry specific factors: key variables
      i) primary/secondary/tertiary
     ii) high/low technology (scale intensive; science based;
         specialized suppliers and traditional technology)
    iii) consumer/producer
     iv) integrated/non integrated
      v) assembling/processing
     vi) market structure; barriers to entry; price and non-price

    b) firm specific factors: key variables (other than nationality
       of ownership)
      i) age
     ii) size
    iii) experience of FDI
     iv) organisational strategy
      v) product or process diversification
     vi) % equity involvement
    vii) degree of transnationality

    c) country specific factors: key variables
      i) environmental/resources/markets
     ii) system (market/centrally planned/mixed economy)
    iii) attitudes, policies and regulations
    (This is sometimes called the ESP paradigm in the literature;
     see Koopmans and Montias (1971))

    d) some specific sectors in which TNCs are predominant (e.g.,
       automobiles, electronics, pharmaceuticals, etc.)

16.5 A hypothetical case study
    a) assumptions
      i) viewpoint of host country
     ii) goal of Nation State to maximum GNP i.e. obtaining the
         right resources at the right price and the optimising
         allocating and technical efficiency (nb. this may not
         be the most important criterion by which TNC activity
         is judged)

    b) direct and indirect effects on Nation State objectives
      i) sectors in which TNCs tend to concentrate
     ii) performance of TNCs in these sectors vs. indigeneous
    iii) spillover effects of TNC presence on other firms in

    c) items to be considered in assessing effects
      i) resource acquisition
         - technology
         - capital
         - management
         - skills
         - entrepreneurship
     ii) access to markets
    iii) allocation of TNC activities and resources
         - TNC involvement in more (or less) productive
         - more (or less) efficient market structure
         - more (or less) product diversification
         - production of appropriate/non appropriate products
     iv) technical
         - appropriate factor mix
         - efficiency at which individual factors are employed
      v) the absorptive capacity of host countries; institutional
         and/or cultural constraints
     vi) the valuation of inputs and inputs (e.g., to what
         extent are these values distorted by government or
         TNC-induced distortions (e.g., subsidies, transfer
         pricing, etc.))

    d) trade off with other economic objectives, e.g. self reliance,
       employment, technological capability, balance of payments

    e) the time path of the impact

16.6 Control aspects of TNCs international resource allocation
    a) the market structure in which TNCs operate

    b) the barriers erected by governments to the market mechanism
       of allocating resources

    c) the role played by governments in providing an environment
       in which TNCs can operate effectively

    d) the distinction between corporate and national (or regional

    e) the assumptions made about the alternatives to TNC
       involvement; e.g. acquisition of resources through the
       market; the development of domestic industry

16.7 Uses and limitations of economic models
    a) the political dimensions

    b) critiques of neo-classical approaches
      i) the dependencia school
     ii) the bargaining approach
    iii) the structuralist approach
     iv) the neo-institutionalist approach

    c) the TNC as an instrument of international capitalism

16.8 the changing dynamics of the interaction between TNCs and
     developing countries (Chaudhuri, 1988)
Dicken(1986) Bierstecker(1978) Lall(1975)
Hood and Young(1979) Frank(1980) Cardoso and Faletto(1979)
Lindsey(1981b) Moran(1986) Senkuttuvan(1981) Tambunlertchai(1977)
Kirchbach(1982) Chay(1982) Weigel(1987)
Jenkins(1987) Radice(1975)
Bornschier and Chase-Dunn(1987)       See Bibliography


17. The transfer of technology: host country perspective (a)

17.1 Some typologies;
    a) the distinction between 'hard' and 'soft' technology,
       embodied and disembodied technology, technology and
       technological capacity, proprietary and non-proprietary
       technology, codifiable and non-codifiable technology;

    b) the distinction between the creation, use of, dissemination
       and absorption of technology

    c) technology as an input to different stages of the value added
       e.g. purchasing, R & D, manufacturing, marketing, etc., the
       distinction between product, process, managerial, information

    d) the concept of technology development; the distinction
       between 'know-how', 'know-why', and 'know-what'(Lall 1987)

17.2 technology and the TNC/host country interaction
    a) the goals of host country
      i) industrial strategy and technological development
     ii) obtaining and absorbing technology
         - importing embodied technology in machinery,
           plant or final goods
         - importing technology and know-how
         - producing indigeneous technology
    iii) obtaining technology and services from TNCs
         - through the foreign affiliate
         - through 'depackaged' purchase

    b) the nature of the interaction
      i) proprietary technology and intra-firm technology transfer
     ii) TNC generated technology in the socio-economic
         environment of developing countries
    iii) the absorptive capacity of developing countries

    c) the goals of TNCs (see 16)
      i) TNC interests in the extent, form and conditions of
         technology transfer
     ii) conditions under which will TNC transfer innovatory
         activities to developing countries

    d) the appropriateness of TNC technology; e.g. do foreign
       affiliates adapt their technology to relative factor prices,
       market size and customer tastes better than do indigeneous
       firms?  What kinds of adaptation e.g., materials, product
       design, machinery and equipment, manufacturing methods do TNCs
       make? Are TNCs do more or less capital intensive than 
       indigeneous firms? Do joint ventures adapt their technologies
       in LDCs more readily than do 100% owned affiliates?

18. The transfer of technology: host country perspective (b) 

18.1 evaluating the (perceived) benefits and costs of the technology
     transference through alternative modes to host developing
     countries. (see also 36)
    i) reasons why TNCs and governments might have different views
       on preferred modes
   ii) perceived benefits and perceived costs of alternative modes
       (a) as viewed by the TNC
       (b) as viewed by the host government
       (c) as viewed by the recipient company
  iii) the balance of private and social costs and benefits
   iv) negotiating and pricing technology transfer
       (a) technology supplier and purchaser bargaining
       (b) influence of government on the terms of purchase
       (c) the issue of access to new technologies
    v) an examination of some developing countries policies and
       their effects
    These issues will be discussed in terms of the three main schools of
    thought on the role played by TNCs in technology transfer to
    developing countries identified in UNCTC 1979 viz. the orthodox,
    radical and reformist.

18.2 policies of governments towards TNCs, related to technology
     creation, acquisition, adaptation and absorption (see also 36)
    a) unilateral policies
      i) options (or policies applied at different times) include
         - do nothing
         - set conditions (for new and/or existing foreign investors)
         - reserve certain sectors for local producers (e.g. Brazilian
           market reserve policy in informatics)
         - specify performance requirements of TNC affiliates with
           respect to local value added, R & D facilities
         - try and eliminate restrictions on technology use by TNCs
         - influence terms and conditions of technology transfer
           (e.g. by controlling forms, types and bases of remuneration;
           and by limiting rates and levels of remuneration)
         - solicit competitive bids from alternative technology 
         - encourage TNCs to sell technology on contractual
           basis (i.e. unbundling technology from the
           package of FDI
         - liberalise technology import controls
         - foster market structure most conducive to
           effective technology transfer and absorption
         - encourage (by subsidies, etc) indigeneous firms
           to engage in innovatory activities
         - impose training obligations on TNC affiliates
         - promote development of state owned enterprises
           (e.g. as in Brazil, India and Indonesia)
     ii) constraints on host country latitude for action
         (i.e. bargaining power)
         - lack of information about cost, availability and
           sources of technology and/or ability to make
           sensible choices from options available
         - lack of bargaining and negotiating skills
         - lack of available alternatives in certain sectors
           or for certain products and processes

    b) multilateral policies
      i) types
         - collective decisions of host governments
         - international agencies
     ii) functions
         - provide information: costs, sources, contractual terms
         - technical assistance in:
           - evaluating costs and benefits of alternative
             technology modes
           - bargaining and negotiating strategies
           - appropriate technology policies, to ensure TNCs make
             optimum contributions to development goals
           - formulate codes and guidelines

18.3 the international patent system: its nature, effects and defects
    a) the different propensity to patent by Tncs. The role of
       patents in technology transfer agreements. Patents and 
       import monopolies. Recent moves towards greater patent

    b) the role of trademarks in technology transfer agreements
       by TNCs. Trademarks and product differentiation activities
UNCTAD(1987) UNCTC(1974)(1979)(1987a)(1988)
Moxon and Lake in Hawkins ed.(1979)
Germidis(1977) Chen(1983b) (1984)
Chung and Lee(1980) Cheong and Lim(1981) Katz(1987)
Ernst and O'Connor(1989) Unger and Saldafia(1985)
Morton(1986) Jenkins(1987) Lall(1987)
Behrman ans Wallender(1977) Stewart(1977) Michalet(1976)
Kirmin(1986)                    See Bibliography


19. The transfer of technology: a home country perspective

19.1 the main concerns of home countries
    a) the link between political power and technological
       dominance (Gilpin 1975)

    b) technology as a major competitive advantage; is one
       exporting one's industrial heritage to a potential
       competitor (Baranson 1979)

    c) defence and security issues

    d) the employment effects of technology transfer

19.2 some theoretical issues
    a) the distribution between social and private costs and
       benefits of technological transfer; the extent to which
       trade in technology is a zero or positive sum game

    b) the kind of technology and/or technological capacity which
       is being transferred (is it competitive or complementary to
       that supplied at home?); the distinction between the 
       technology transferred within industrialised countries and
       between these countries and developing countries

    c) the extent to which the home firm (or country) possesses
       a monopoly in the technology being exported

    d) short and long run consequences of the export of technology

    e) the costs and benefits of concluding technologically
       oriented alliances and technology sharing agreements

19.3 TNC technology transfer and the growth of manufactured imports
     into home countries
    a) the role of TNCs in developing country manufactured exports

    b) a comparison between technology transfer by Japanese and US
       TNCs; the Kojima hypothesis

    c) the role of developing country exports in developed country
       adjustment problems

19.4 reactions of home countries
    a) policy options
      i) restrict certain types of high technology exports,
         and to certain countries
     ii) negotiate agreements to limit use made of technology
    iii) extra territorial provisions
     iv) restructure economies in light of changing
         comparative advantages
      v) ensure that the appropriate 'social' price is changed
         for technology
     vi) encourage the tightening up of patent procedures in
         recipient countries
    vii) encourage multilateral action to enforce protection

    b) the costs of not transferring technology
OECD(1982) Dunning(1986) (1988b)
Behrman and Mikesell(1980)
McIntyre and Papp(1987)               See Bibliography


20. The transfer of capital, management skills and entrepreneuship:
    the provision of markets

20.1 introduction
     the TNC as a provider and controller of resources. To what extent,
     and under what conditions, are the right kind of resources provided
     at the right price; and how far is the control exercised over these
     resources in the best interests of the host country?

20.2 capital
    a) alternative sources of capital for TNC activity: financing
       activities of established subsidiaries vs. new ventures

    b) the relative importance of TNCs as capital suppliers to
       developing countries; the role of intra-firm capital

    c) establishing host country preferences for alternative
       sources of financing

    d) the host country's balance of payments situation as a factor
       influencing the source of capital

    e) options of host country governments to secure capital from
       most favourable sources on best terms

    f) debt equity swaps and the participation of TNCs

20.3 management skills (see also 14 and 24)
    a) the trade off between access to imported human capital and
       upgrading indigeneous skills

    b) alternative sources
      i) buy on the open market
     ii) contract with foreign firms
    iii) TNC equity investment

    c) the role of the consultant and technical advisor

20.4 entrepreneurship
    a) that provided by TNCs

    b) the impact on the entrepreneurial culture and capabilities
       in developing countries
      i) within TNC subsidiaries
     ii) on other firms

    c) the relationship between foreign capital and the local
       bourgeoisie and, more specifically, with the large domestic
       economic groups

20.5 access to, and control of inputs and output markets
    a) possible conflicts of interest between TNCs and host

    b) contribution of TNC varies with
      i) type of investment
     ii) size and  age of TNC involvement
    iii) policies of host (and occasionally home) governments
         (see also 25,26 and 27)
on 20.2:
OECD(1981) UNCTC(1989) Ch. IX
Dunning(1981) Ch 7
Lichtenjstejn and Trajtenberg(1987)
Riedel in Hawkins ed.(1979) Helleiner(1989) Lessard ed.(1979)
Lall and Streeten(1977)
Lessard in Hawkins ed.(1979)
Hood and Young(1979)                   See Bibliography

-RRojas Research Unit/1996-----------------