Transnationals and the third world: The R&D factor

Abstract

In the current tide of interest in the development of technological capability in the Third World, the discussion has focused mainly on two objectives: the transfer and assimilation of imported technology, and the building up of an indigenous research and development (R&D) structure. The role of transnational companies (TNCs) has been considered mainly in the former context.1 On the positive side, TNCs have been taken to be the prime source of advanced technology, both as direct investors and as licensors and sellers of equipment. On the negative side, they have been accused of a multitude of sins, from overcharging for the technology they provide to distorting the whole pattern of economic development. While it is not the intention to enter into the larger debate, I would like to explore briefly the possibility that TNCs can contribute to the second objective of technological development, that of strengthening the R&D capability of developing countries. Assuming that the type of technology in which TNCs specialise usually modern, complex and capital intensive is beneficial to developing countries, or at least for those which have attained some degree of industrialisation, can TNCs help countries in the latter category by relocating their R&D activities there? The argument is mainly speculative. TNCs are starting to relocate R&D abroad, but very little of this is going to the Third World. Certainly, in relation to the relocation of production by TNCs from developed to developing countries, the relocation to technological activity is miniscule. However, it is only the start and the signs are that it will grow rapidly in the future. The economic forces which make for a shift in comparative advantage in production also make, though the degree and nature of the influence differs, for a shift in comparative advantage in R&D.