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Foreign Firms, Technological Capabilities and Economic Performance

Evidence from Africa, Asia and Latin America Rajah Rasiah, Professor of Technology and Innovation Policy, Faculty of Economics and Administration, University of Malaya, Malaysia, Professorial Fellow, UNU-MERIT, Netherlands, Senior Research Associate, Sanjaya Lall Centre for Technology and Development, Oxford University, UK With contributions from Geoffrey G. Gachino, Jorge Monge, Henry Tamale, Ganesh Rasagam and Thabo Gopane
This book employs novel techniques to compare technological capabilities and economic performance in seven countries at varying stages of industrial development: Brazil, Costa Rica, Indonesia, Kenya, Malaysia, South Africa and Uganda. The author uses a methodology drawn from the technology capability framework, but extensively adapts and simplifies it to extract common cross-industry parameters for statistical analysis. He employs the framework to compare the technological, local sourcing and performance dynamics of foreign and local firms in a variety of industries.
Extent: 240 pp
Hardback Price: $129.00 Web: $116.10
Publication Date: 2005
ISBN: 978 1 84376 986 6
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  • Business and Management
  • International Business
  • Development Studies
  • Development Economics
  • Development Studies
  • Economics and Finance
  • Development Economics
  • Innovation and Technology
  • Innovation Policy
This book employs novel techniques to compare technological capabilities and economic performance in seven countries at varying stages of industrial development: Brazil, Costa Rica, Indonesia, Kenya, Malaysia, South Africa and Uganda. The author uses a methodology drawn from the technology capability framework, but extensively adapts and simplifies it to extract common cross-industry parameters for statistical analysis. He employs the framework to compare the technological, local sourcing and performance dynamics of foreign and local firms in a variety of industries.

The results offer a common synthesis and fresh ideas on the importance of foreign firms in technological capability building and economic performance in developing countries. They reveal that although foreign firms tend to enjoy higher human resource and process technology capabilities in the most underdeveloped economies, in the more advanced nations this comparative advantage is significantly eroded. The author shows how the institutional and systemic strength of a country can help to explain the level of participation of foreign firms in R&D activities. He also identifies domestic and regional markets, infrastructure, incentives, natural resources and human capital as important factors in stimulating significant R&D investment by foreign firms.

This interesting and well-written book presents an original examination of the dynamic relationship between foreign firms, technology, innovation and economic performance in Asia, Africa and Latin America. Academics, policymakers and NGOs interested in development economics, technology policy and trade will find this to be an extremely valuable resource.
‘This book by Rajah Rasiah and colleagues is a major step forward. . . It bases the analysis of foreign and local firms in a range of developing countries squarely on measuring and comparing technological capabilities. This is a significant advance in methodological terms. It also yields very interesting results. What adds to the interest is the range of countries covered, from industrially advanced nations like Brazil, South Africa and Malaysia, to relatively backward ones such as Kenya and Uganda. The book is thoroughly researched, rigorous in its analysis and comprehensive in its coverage of the literature.’
– From the foreword by the late Sanjaya Lall

‘This volume contains a number of original, well-researched and empirically valuable essays and case studies on the role which foreign firms may play in upgrading the technological capabilities and competitiveness of seven developing countries. Professor Rasiah is to be congratulated for assembling such a varied and interesting set of contributions, each of which should be essential reading for all those interested in the impact of foreign direct investment on economic development and structural transformation.’
– John H. Dunning, University of Reading, UK and Rutgers University, US

‘Rajah Rasiah’s broad-ranging study breaks new ground in analyzing the relationship between a country’s technological capabilities, the activities of foreign firms, and economic performance. His rigorous yet flexible framework, which incorporates institutional complexities into a statistical analysis, allows him to look at the development process in seven diverse countries. His findings that the relative advantages of foreign multinational firms over local firms declines over the development trajectory should change our thinking as well as our policies. This book is a must-read for anyone interested in the role that technology plays in the development process.’
– Clair Brown, University of California, Berkeley, US

‘This book fills an important gap in the literature on foreign direct investment and economic development. Based on an excellent review of existing theories, comparative case studies from Africa, Asia and Latin America explore diverse approaches that developing countries can use to benefit from the presence of foreign firms to improve technological capabilities and economic performance. A must-read for students interested in contemporary pathways to industrialization.’
– Dieter Ernst, East–West Center, Honolulu, US
With contributions from: G.G. Gachino, T. Gopane, J. Monge, G. Rasagam, H. Tamale
Contents: Preface Foreword 1. Introduction 2. Productivity, Export and Technological Differences in Kenya 3. Technology, Local Sourcing and Economic Performance in South Africa 4. Technology and Economic Performance in Uganda 5. Technological Intensity and Export Incidence in Indonesia 6. Economic Performance, Local Sourcing and Technological Intensities in Malaysia 7. Productivity, Export, Local Sourcing and Technology in Brazil 8. Intel-Driven Enterprise Linkages in Costa Rica Bibliography Index