Government influence on tech development

Question 1

Governmental influence at home: the less obvious

Answer 1

– The institutional framework within which firms operate and act also determines these activities.
– NIS view
– Government directly or indirectly sets things like
» Supply of trained manpower
» Interest rates, finance capital culture
» Entrepreneurial incentives
» Environmental regulations
» IPR protection
•All of which influence technological development.

Question 2

Government influence at home

Answer 2

• Policies have traditionally focused on a mix of social and economic objectives
– Things that affect innovation and technology in a country may not be targeted with that intent,
– Conflict between policy and consumer ideas, use and regulations
– Often, policies that directly focus on technology and innovation have been ineffective
–Domestic innovation is also affected by government regulations! (more later)

• Holistic, coordinated strategies
–Japan, Korea, China
• Fragmented and uncoordinated strategies
–US, W. Europe (traditionally)
• Mission oriented (Big science to meet big problems) vs. diffusion oriented strategies (facilitating rather than directing change).

Question 3

What can a (host) country do?

Answer 3

• A host country government can, in the face of FDI
– Do nothing, if…
» Strong institutions with high bargaining power.
» Or, weakened position and bargaining power (small, resource driven countries)
– Limit certain sectors to domestic ownership
– Impose JVs and IPR agreements with foreign MNEs
– Limit the amount of inward investment
– Otherwise influence terms of tech transfer» Discourage ‘restrictive clauses’ by MNEs
– Encourage indigenous tech. development

Question 4

The double edged sword of foreign technology in host countries

Answer 4

• Governments overestimate availability of foreign technology notowned by MNEs, as well as their abilities to implement it.
– Underestimate cost
• However, control of technology by foreign MNEs (in the host country) will not necessarily lead to raised competitiveness by host countries.
• Examples of many varied success stories
– Japan – Successfully limiting inward technology-based FDI
– India – Achieved economic progress with little FDI, then opened up (90s – now)

Question 5

Developing countries and technological capabilities

Answer 5

• Integrated parts production (Mexico, Brazil, etc. in automotive)
• OEM production (South Korea, Taiwan, China traditionally)
• ‘Reverse brain drain’ through incentives and contract management with MNEs

Question 6

Homecountry government roles involving outward FDI

Answer 6

• (Own) asset exploiting investment

* Asset augmenting investment

Question 7

(Own) asset exploiting investment

Answer 7

In the asset-exploitation perspective, FDI is viewed as the transfer of a firm’s proprietary assets across border

– Creating new competition?
– Feedback in technology resulting from FDI abroad
– Import spillovers and more business to technology suppliers at home
– Control of the use of technology at home

Question 8

Asset augmenting investment

Answer 8

– Cross border M&As
– Other types of resource seeking investment
– Home countries need to foster institutions that can absorb the assets effectively
» Absorptive capacity – its not much worth if a MNE goes abroad and the home country cannot absob this. Needs to be capavity to absorb, which are built over time.
» Institutions, norms and values. Eg. When FDI happens a lot of times, people will go from the home to host too. If norms and values is not aligned, it can be hard for this process to work.

Question 9

Some prescriptions of country level strategies:

Answer 9

– Countries should/can not expect to be ‘masters of all’.
– Governments needwell defined technology strategies
– Countries should potentially collaborate to learn from one another regarding technology management and MNE negotiations
– A holistic and integrated approach to both inward and outward technology-based FDI is needed on the country level.

Question 10

The Role of Government in Domestic Innovation and Technology:

Answer 10

Policy can help individuals recognize entrepreneurial opportunities through…
• Education
–General
–Science and technology
–Entrepreneurship education
• Creating intellectual property awareness
–Patent system (i.e. protection of IP)
• Network building (more on this later)