Technology Contribution of MNCs To Developing Countries

In recent economic climate the link between technology transfers and Foreign Direct Investment seems to be essential for the Multinational Corporations. The main objective of MNCs is to maximize its profits. This requires them to produce the goods and services at the lowest possible cost (fixed and variable) by exploiting the resources of the developing countries apart from their home country (Pool and Stamos 1990). The channels of international technology transfer and their importance of growth have been studies extensively in 1990s. The study identifies three principal channels of international technology spillovers. The first is the direct transfer of technology via international licensing agreement (Eaton and Kortum 1996) on the contrary this source is considered less prominent as most valuable technologies are not available on license (World Investment Report 2000). The second is FDI from developed countries to developing countries as it is considered the cheapest and most reliable technique as a spillover (Blomström and Kokko 1997). The third is technology transfer through international trade where import and export of intermediate goods and capital products are exchanged (Markusen 1989, Clerides, Lach and Tybout 1997). On the other hand, it is seen that MNCs do not encourage spillovers due to (a) transmission of technology to their subsidiaries abroad. (b) Technologies that does not support the host country’s environment. (c) Maintain a control over the technology by reducing the spillovers and encouraging import. (d) Maintaining advanced technology than developing countries through Intellectual Property Rights (Aitken and Harrison et al. 1999). As an emerging economy, India has a huge presence of multinational corporations...

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