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Catching up and asset-seeking FDI: Outbound FDI by developing country firms as a means to access more advanced systems of innovation Helena Barnard.

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Presentation on theme: "Catching up and asset-seeking FDI: Outbound FDI by developing country firms as a means to access more advanced systems of innovation Helena Barnard."— Presentation transcript:

1 Catching up and asset-seeking FDI: Outbound FDI by developing country firms as a means to access more advanced systems of innovation Helena Barnard

2 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

3 FDI as Means of Connecting Systems of Innovation Industry organizations Suppliers & sub- contractors Universities Competitors developing country multinational subsidiary Advanced system of innovation Industry organizations Suppliers & sub-contractors Universities Competitors Developing country multinational parent Intermediate system of innovation Outbound FDI by developing country firm as a way of linking with more advanced system of innovation

4 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

5 Methodological Concerns 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 knowledge- seeking as goal Strongly associated with economic growth Need to develop supportive infrastructure Multiple countries examined to increase generalizability Control for likely differences between different industries

6 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

7 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

8 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 – ?

9 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

10 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

11 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

12 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

13 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

14 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

15 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

16 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 XXX? Host country commercial infrastructure (suppliers, customers, competitors) X Host country institutional infrastructure (research consortia, government) X Home country parent X?XX Home country operations X Home country suppliers X

17 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

18 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?

19 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

20 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

21 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

22 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?

23 Summary Feedback welcomed: Problem appropriately conceptualized? Methodology appropriate and doable? Second industry? Develop capabilities in interaction with more advanced system of innovation Share capabilities with parent Disseminate capabilities to less advanced system of innovation


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