Exploring Manufacturing Firms’ Absorption Capacity of Imported Technology in Pakistan

Abstract

In existing literature there is a general consensus that the only effective and compelling approach for developing countries to enhance the capacity of their production units is by exposure to foreign technology. However, literature on the subject has outlined some conditions necessary to reap the potential gains of imported technology in their production process. For instance, it endorses that a country’s potential gain of imported technology revolves around the capacity of the production units of country to observe and capably utilize imported technology in their production process. In this context, this study aims to explore how Pakistan’s manufacturing firms incorporate imported technology in its production process. To meet the objective of the study, we collected data from 86 large scale manufacturing firms across the country to quantify the absorption capacity of manufacturing firms. The evidence seen from the field survey shows that, on average, 60% of the workers are technical workers, which is a good sign. Regarding the awareness of firms towards R&D the responses were surprising, as few firms were focusing on this critical component and most of the entrepreneurs are reluctant to invest in the R&D sector.