Transcript Catching up and asset-seeking FDI: Outbound FDI by

Catching up and
asset-seeking FDI: Outbound
FDI by developing country
firms as a means to access
more advanced systems of
innovation
Helena Barnard
Goal of Presentation
Early in research process
Feedback on methodological issues:
Problem adequately conceptualized?
Sub-problems comprehensively identified?
Methods suggested for study of sub-problems
a) appropriate and b) workable?
Choice of firms for second industry
LARGE scope – need for balance between:
Workable, in terms of both time investment needed and
presentation of results
Comprehensive, i.e. addressing research issue and
making best use of current well-resourced context
FDI as Means of Connecting
Systems of Innovation Advanced system of innovation
Intermediate system of innovation
Industry
organizations
Industry
organizations
Competitors
Developing
country
multinational
parent
Universities
Competitors
Suppliers &
sub-contractors
Outbound FDI by developing country
firm as a way of linking with more
advanced system of innovation
developing country
multinational
subsidiary
Universities
Suppliers &
subcontractors
Summary of Argument
Given the difference between less and more
developed systems of innovation
Outbound FDI to more developed countries will
benefit home countries if:
Developing country MNCs do create new knowledge
through interaction with more advanced systems of
innovation
Developing country MNC subsidiaries from more
advanced contexts successfully share new knowledge
with parent in less developed country
Developing country MNC parent disseminates new
knowledge to other actors in the less mature system of
innovation
Methodological Concerns
Multiple countries examined to increase generalizability
“Control” for likely differences between different industries
Resource-based industry
Often associated with
developing countries
More likely ownership
advantage to allow survival
in more developed
contexts
Older, therefore more likely
to have some kind of
institutional infrastructure
High technology industry
Agreement that
knowledge is central to
the industry
Younger firms more likely
to have knowledgeseeking as goal
Strongly associated with
economic growth
Need to develop
supportive infrastructure
Mining as Resource-Based Industry
Technology relevant for extraction (e.g. the
“unmanned mine”) and prospecting
Typical FDI pattern is to other countries at similar
or lower level of development in the same region,
e.g. Brazilian mining firm investing in Chilean
mines
Three firms from three less developed countries
invest in a total of five more developed countries:
Anglo-American (South Africa) in Canada and Australia
Grupo Mexico (Mexico) in USA
CVRD (Brazil) in Norway and France
High Technology Firms: ?
Looking for:
Same three home countries as for mining (Brazil, Mexico,
SA)
Firms all in same industry
Firms large enough to form “global network”
No easily defined “giants” in high technology
industries - to be expected, given lower level of
development of system of innovation
Areas of high technology expertise typically due to
military-related state spending, e.g. both SA and
Brazil have nuclear, aircraft and petrochemical
strengths - but not strong commercial successes
Information Technology Industry
High technology industry of the new
technological paradigm
A country like India provides evidence that
developing countries can successfully enter the
field
Firms:
Information Technology service firm Dimension Data
(South Africa) with “centres of excellence” in
Australia, Belgium, UK, and SA
Brazil and Mexico – ?
Data Needed to Support Argument
Differences between systems of
innovation – collect pre-existing data
How new capabilities are developed and
shared – gather data:
Mainly from firms themselves
Also from other actors in systems of
innovation
Using both interview and survey data
Differences in Systems of Innovation
Analyze home countries and all more developed
countries where focal firms operate
Compare more and less developed countries
Mining: Brazil, SA and Mexico compared to Australia,
Canada, France, Norway and US
Information technology: TBD
Do general as well as industry-specific
comparison of systems of innovation
In case of specific analysis, each industry done
separately, comparing more and less advanced
Mainly existing data sources, e.g. UNHDI, patent
data, exports
General Comparison between
Systems of Innovation
Measures:
GDP per capita
Government and private R&D spending
Education enrollments at primary, secondary and
tertiary levels, specifically for technical fields
Manufactured exports, divided by low, medium
and high technology
Patent activity
Scientific production
Industry-Specific Comparison
Between Systems of Innovation
Cross-country comparison of knowledge-creating
institutional infrastructure
Education and training
Basic training, e.g. trade schools
Advanced training, e.g. degrees offered
Research institutions
Research linked to tertiary institutions
Other state or para-statal institutions
Other, e.g. industry consortia
Other Industry Actors in Systems of
Innovation
For focal firms’ home as well as host countries:
Lobbying institutions (employer and worker
organisations)
Competitors, i.e. other firms in same industry
Main supplier firms
Subsidiaries in same location, i.e. where horizontal or
vertical integration
Main customers or customer groups
The role of these actors will be considered in
greater depth in the later sections
Data both archival and obtained through firm
interviews and surveys
Does FDI to More Developed
Countries Benefit the Home Country?
Three main research questions:
(How) does interaction with the more advanced
system of innovation help developing country firms
expand their capabilities?
(How) do capabilities flow from the subsidiary in the
more to the parent in the less developed system of
innovation?
(How) do capabilities disseminate from the parent to
the other actors in the less developed system of
innovation?
Both interviews and surveys to explore these
questions
Data Gathering from Firms
Main sources: subsidiaries and parent of firms
Also other actors in system of innovation
Interviews
Few key people in organisation
Detailed understanding of issues
Potential to identify important non-firm actors and
institutions
Surveys
Input can be gathered from more people – capabilities
are developed in communities
Addressing concerns about replicability
Quantitative analysis
Summary of Data Sources per Topic
Actors to interview and/or
survey
Develop
capabilities with
more advanced
system of
innovation
Share
capabilities
with parent
Disseminate
capabilities to
less advanced
system of
innovation
Subsidiary in host country
X
X
X?
Host country commercial
infrastructure (suppliers,
customers, competitors)
X
Host country institutional
infrastructure (research
consortia, government)
X
Home country parent
X?
X
X
Home country operations
X
Home country suppliers
X
Data Gathering from Firms –
Some Concerns
LARGE number of sites (about 10 countries!)
Enough funding secured to visit about half the
sites
Difficulties with data gathering, especially
conducting interviews:
Additional funding needed to visit remaining sites
Time
Language – I do not speak Spanish (Mexico) or
Portugese (Brazil)
If in some cases it may only be possible to obtain
survey data – consider tradeoffs
Expanding Capabilities through
Interaction with More Advanced
Systems of Innovation
Data gathered from subsidiaries, institutional and
other actors in more advanced system of innovation
Also some archival data, e.g. press releases
How do developing country firms gain access to
more advanced systems of innovation?
Social networks, e.g. in Korean case
Having something to contribute, i.e. reciprocity and
membership of the “club” of innovators
Given their relationships with and in the system,
what types of capabilities do they develop?
Expanding Capabilities through
Interaction with More Advanced
Systems of Innovation (cont.)
Focus interview questions and survey items on:
Relationships and contacts between firm and other actors
Capabilities and contributions of firm that are seen as
potentially valuable within new system of innovation
Benefits sought in more developed context
Interviews can best uncover perceptions and
relationships and how they determine access to more
advanced system of innovation
Triangulate by also interviewing host country actors
Survey to focus on capabilities sought
Sharing Capabilities with Parent in
Less Developed System of Innovation
Draw on literature on “reverse technology transfer”
and knowledge flows within globally integrated
MNC network
Survey data most important in this section
Develop or adapt items on:
Types of knowledge that is shared with parent
Strategies to support knowledge flows
Since knowledge creation is a communal process in
which all parties play an active role:
Distribute surveys to multiple respondents in each site
Survey subsidiaries as well as parent
Disseminating Capabilities to Less
Developed System of Innovation
“Spillovers” of newly acquired expertise can be:
Unintentional, e.g. through personnel movements
Deliberate, e.g. company wants new procedure used
Unintentional spillovers hard to measure
Focus on deliberate spillovers
A stringent but narrow test – beneficial spillovers
possible even where failure of deliberate spillovers
Triangulate account of participants in system of
innovation with that of focal firm
Disseminating Capabilities to Less
Developed System of Innovation (cont.)
Home country actors most likely to be affected by
new capabilities:
Domestic operating units of focal firm, e.g. local mines
Domestic supplier networks
Domestic non-firm research partners
Data gathered from multiple respondents in each unit
Open-ended interview as well as survey questions:
What types of relationships do they have with the focal
firm?
What types of capabilities do they develop, and how?
Summary
Disseminate
capabilities to
less advanced
system of
innovation
Share capabilities
with parent
Develop
capabilities in
interaction with
more advanced
system of
innovation
Feedback welcomed:
Problem appropriately conceptualized?
Methodology appropriate and doable?
Second industry?