Technology contribution of multinationals



The multinational enterprises are at the hub of internationalized competition and indeed global economics [2] [7] [3] [4](Blomstrom and kokko 1997), (Buckley and casson 1994). They are drivers of the global economy and the financial standards. Multinationals really hold the key for the growth and technological changes and research advancements in developing countries. Technological advancement can be handled by either innovation or research in particular fields. Even though the multinational enterprises promote the host nation with technological advancement, high competition, and good trade statistics, it is decided only by nature of MNE and the host country characteristics and its policy environments [2] [7] (Blomstrom 1997).

MNC and its types:

Multi-national enterprise is the enterprise which owns company operations and control activities in more than one country [5] [3] [4] [1] (Buckley 1997). Which usually fuelled by two terms, they are home and host. Home country refers to the country which it was originated and registered. Host refers to the country where it is situated. Multinational companies could aim at the host for several reasons, mainly of cheap labour, skilful professionals, technological expertise, availability of raw materials, expansion of market, adequate infrastructure requirement, legal flexibilities, and manpower or might be of specific geographical aspects. I would to like illustrate the gas & oil companies which do prefer gulf, mid-east countries for resource availability. On general they are classified on the basis of their requirements in host countries such as market seekers, resource seekers, skills seekers, assets seekers [7] (samantra 2006) [4] (Kingsbury 2004) etc. On basis of product differentiation, the MNE can be categorized into three types,

  1. Horizontally diversified: (Same product in different location).
  2. Vertically diversified: (Intermediate products of same product sequence).
  3. Conglomerately diversified: (Products of different production sequence). [3] (Buckley, 1994)
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Most of MNE are horizontally diversified, which produces same brand products with the same technology what they had used commonly, so these companies usually have less perspectives of technological impact in the host. They usually rely on the cheap labour and technological expertise workers. The vertically diversified are high technological players, they usually have prime reason for host as skilled workers and low production costs. Third type of MNE mostly chooses host for geocentric requirements, which doesn't have that much involvement in technical improvement of host [3] (buckley, 1994).

Technology contribution:

Multinational Enterprises gives the host a splendid lead in nation's development, employability, high living standards, foreign direct investment increase, and good trade statistics. Apart from those discussed earlier the major contribution of MNE to the host is the technical edge. By the word technology i mean the research and developments of the core field. Generally academic scholars refer technological aspect of MNC as majorly innovation [6] (Sjoholm 1997). Innovation might be seen transparently from the spectators view, but the nation's development and improvements are more basically depends on research and knowledge development rather than the innovation. Individual perspective is very much differentiated from country's view; innovation in various fields might have shown skilful manpower. But the nation could be recognized by the value of research quality and the patents they possess. One of the general statistics shown as clearly that more than 90% of research patents are held by the MNE's of the industrialised nations [1]. Innovation is one of the major factors for the growth; this is the reason why the developed superpower nations are really spending more on research and developments. Innovation normally increases the market and competition [2] [5] [6] (Sjoholm 1997) (Blank 1979).

The host welcomes MNE as a necessary tool for reducing the technological backwardness of their countries [3] [5] (blank 1979) (buckley 1994). Acquiring the new technology and adapting it could fetch them the reduction of the gap between them and other developed countries. MNE's conduct most of the research & developments and knowledge studies in host country and they would try to implement it and test it on host country and then they transferred the technology to the parent firms might leak out some patterns of it in host, which is referred as technological spillovers [6] [5] (Sjoholm 1997). The spillovers might be positive or negative to the host countries, depends on host country technologies and its acceptances to change. These positive changes could make them to reasonable growth in economy and country status [6] (Sjoholm 1997). I would like to illustrate an example of software industries in India; they had shown wealthy positive spillovers which resulted in the giant leap in the software industries, besides the fact, it had improved in economy status and become the second biggest attractor for FDI next to china. However the technological mismatch between developed and developing country (host) might provide an obstacle to the spillovers [6] (Sjoholm 1997). The technology designed for the developed superpower nations could not be accepted or less suited for the developing and less developed countries. It could create the huge technological gap between the domestic and foreign firms.

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The technological gap could provide the good sweep over the market and economy to the foreign firms, which might have force the local firms to work hard, improvise and refurbish their operation strategies to the level of foreign firms [5] (Blank 1979). Obviously due to these changes the technology in the host would generally improve. For the sake remain in the market there could be more technical advancement required in local firms of host. Hence the training and technical education would tool up to sky-rocketing in the host. This in turn can attract more investors from the developed countries (ex: this is what happened in INDIA and CHINA in mid 90's).

The MNE's working environment could increase the multi-cultural aspects in the host. Due to these giant companies, the wage rate [3] (buckley 1994) would peak and those employees working in the local firms could get some higher bundles of offers and wage hike from the local firms, which wants them to stick on the jobs to avoid migration to MNE's who generally required more number of skilful employees. It increases the competition among local and global players. This obviously increases the standard of living in host [2] (blomstrom and kokko 1997). Proportionately the purchasing power and market will be expanding in host. These results in establishment of newer brands, global brands, luxurious life style, great development in infrastructure field, new technological equipments, advanced scientific instruments, effective and efficient services.

Transfer technology and its issues:

Above i discussed about the positive technological effects of MNE's presence in the host. But it mainly depends on the host technology strategy and local market. The acceptance for the change is biggest problem of all-time in developing countries. Most evidence on multinationals' effects has to do with effects in industrial countries and it is impossible to ignore the risk that the multinationals` entry into developing countries may replace local production and force local firms out of business, rather than force them to become more efficient [1] [5] (blank 1979).There are few factors which are considered to be decider, whether the transfer in technology of host country will benefit the host economy. According to my thought, the factors could be balancing local economy and its market opportunities, acceptance to change, adequate training, wages, employability, high profile managing strategy of MNE's, level of economic developments in host, adequate infrastructure etc. Major factor which decides the host acceptance is the doubt or even fear about their market existence []. The existence of multinationals could deform the national progress by imbalances in host economy. Consequently it forces the host overly dependent on the external forces. Generally this is said to be denationalization [5] (Lapalombara and blank 1979), which means host officials and organization have little or literally no control over their progress []. For example: this is the same happened during 18th and 19th century when British east companies dominated the progress of various nations and make them as colonies. Later they got themselves out and got independence from Britain now they are known as commonwealth countries. Recent examples show the similar effects on Latin America which feels the denationalized by US multinationals.

Another big problem the host suffers is changing to the new technology, is required more sophisticated training and more advance education in quite a bit of time. Wage inequality also became the obstacle to the technological spill over in host. Job security is another deciding factor, MNE's usually look for the skilful workers, which are renowned for its hire and fire policies. Once the MNE's went off the host. It is very difficult to manage the unemployability [5] (Blank 1979) because their skills are not transferable to low end. Understanding the political and social environments of the host is another major factor. Cultural factor is considered to be most effective, for the MNE's because some sorts of works are never accepted. On those conditions MNE's technology never going to win those cultural restraints in the host.

Other benefits:

  • Increase in local economy, GDP of host.
  • Increase in FDI, Capitol employed.
  • High employability.
  • Technical advancement.
  • High degree of competition.
  • Superior Management.
  • High standard of living.
  • Brand establishment.
  • Research & development, innovation in various fields.


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There is a high profile debate exist generally now, whether the MNCs contributing to the sustainable development of a developing country? Or, do they simply exploit developing countries creating a country dependent on that MNC for their own economic growth? [1] [7] (samantra et al 2006) (Kingsbury et al 2004) I for one stands with MNE's are good to the host, if they are regulated and managed by the host. MNE's are the source of technological advancement for the developing countries. The transfer of technology won't be a problem if they are properly managed with expert strategies by MNE.


  1. Available at: [Accessed at 21 March 2010]
  2. Blomstrom, M. Kokko, A. 1997. The impact of foreign investment in host countries: A review of empirical evidence. World Bank Policy Research Working Paper No. 1745 PP: 113-143.
  3. Buckley, P.J., Casson, M. 1994. The future of multinational enterprise. Great Britain: The macmillan press
  4. Kingsbury, D. Et al. 2004. Key issues in development. London: Macmillan-palgrave
  5. Lapalombara, J., Blank, S. 1979. Multinational Corporations and developing countries. Report no: 767. USA: office of publications of the conference board.
  6. Sjoholm, F. 1997. Technology gap, competition and spillovers from direct foreign investment: Evidence from established data. Working paper series in economics and finance No: 211. PP 511-537.
  7. Samantra, G. Et al. 2006. "Expanding Abroad" Chapter one in Transactional management: text, cases & readings in cross-border management. Newyork: McGrawHill.