The Effect of Technology Transfers on Productivity Increment in Japanese Overseas Manufacturing

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Technological innovation and technology transfer play an important role in enhancing the productivity of MNEs, especially the Japanese overseas manufacturing subsidiaries. The purpose of this study is to examine the association between R&D cost, technology purchase, and total factor productivity change and regression models with the survey data of Japanese Ministry of Economy, Trade, and Industry on Overseas Business Activities conducted over 2021-2023. Basic and Trend Surveys were combined to create a sample of 1,798 affiliates across 38 countries with variables such as R&D spending, Technology Transfer payments, capital stock growth, and employment growth. The evidence presented suggests that both technology and R&D payments enhance productivity improvement for the company, and the estimated returns on R&D investments is 0.54 Yen (JPY) for every JPY spent and technology transfer payments 0.76 JPY. The regression results also show a synergistic relationship between technology and R&D payments indicating that affiliates involved in both processes report higher levels of efficiency. In addition, the study also focuses on geographical specialization of technology transfer and R&D in industries including chemicals, pharmaceuticals, and machinery, where major expenditure on R&D is done across the globe and particularly in United States and in Europe.