Abstract
This paper investigates the domestic productivity and spillover effects of foreign technology and embodied R&D on Egyptian manufacturing industries, 2006 to 2009. It also analyses the heterogeneous sectoral effects of technology transfer by focusing specifically on the productivity effects on highly internationalized and technology-intensive industries. These are expected to have greater absorptive capacity with respect to foreign technology and therefore larger productivity effects because of their greater exposure to foreign competition and greater technological capacity respectively. This study is the first to analyse the efficiency effects of foreign technology by classifying industries in this manner. It finds that foreign technology and embodied R&D have positive and significant industry-specific effects on domestic productivity and TFP in technology-intensive industries but that these are weaker in internationally oriented industries. The study suggests that only technological-intensive industries in Egypt have sufficient absorptive capacity to assimilate foreign technology effectively. The paper’s findings highlight the key role of foreign technology in domestic productivity growth, subject to the absorptive capacity of the domestic labour force, and the need for improved policies to promote the domestic benefits of technology transfer through the accumulation of local technological competences.
Highlights
The transfer of foreign technology is a critically important conduit for developing countries to acquire advanced techniques and innovations in order for them to improve productivity and increase economic growth
The ordinary least square (OLS) results are shown in Columns (1) and (2), while those in Columns (3) and (4) include industry fixed effects (FE) from the panel analysis
This suggests that Egyptian industries generally lack the human capital and in-house R&D capacity to capture the productivity effects embodied in foreign R&D, echoing the findings of Hanafy (2015)
Summary
The transfer of foreign technology is a critically important conduit for developing countries to acquire advanced techniques and innovations in order for them to improve productivity and increase economic growth. The effectiveness of such transfers through learning and their efficient utilization, is highly dependent upon the absorptive capacity of a host country’s human capital stock and the magnitude of the technology gap with the source country. Industrialized economies have invested heavily in R&D and human capital to develop innovative production methods and proprietary technology resulting in both technological progress and the accumulation of substantial stocks of knowledge. Persistent and unresolved structural and institutional constraints and impediments to innovation and technical advancement, including a lack of appropriate policies, to foster the accumulation of relevant knowledge necessary for the successful adoption of new technologies
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