Competitiveness, FDI and Technological Activity in East Asia
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Competitiveness, FDI and Technological Activity in East Asia

Edited by Sanjaya Lall and Shujiro Urata

This book addresses this imbalance with new country studies on the interaction between foreign direct investment (FDI) and technological activity in building export competitiveness. The book covers China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand, highlighting different strategic approaches to building capabilities in industrial enterprises. The book also includes a general overview and studies of Japanese multinationals overseas.
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Chapter 5: Overseas R & D activities and intra-firm technology transfer: the case of Japanese multinationals

Shujiro Urata and Hiroki Kawai


5. Overseas R&D activities and intrafirm technology transfer: the case of Japanese multinationals Shujiro Urata and Hiroki Kawai1 1. INTRODUCTION The importance of technology in determining competitiveness, for firms as well as for countries, has increased. For developing countries assimilating foreign technology has always been crucial to economic growth. Indeed, many successful cases of economic development, including Japan, Korea and Taiwan in East Asia, indicate that the successful assimilation of foreign technology played a very important role. Various channels exist for developing countries to obtain technology from foreign countries. The import of capital goods and technology through licensing were major channels for obtaining technology for Japan and Korea in the post-World War II period, while foreign direct investment (FDI) was also an important channel for Taiwan. In addition, visits by foreign researchers and engineers were used as channels for obtaining foreign technology for these countries. The role of FDI in technology transfer has grown greatly in recent years, for several reasons. First, FDI has risen rapidly, faster than other international transactions. Thus, world trade in goods and services increased 1.6 times from 1990 to 1998, while FDI increased 3.2 times. Asia recorded the fastest growth in FDI inflows in the world in this period, growing 4.2 times. Second, firms have come to prefer FDI to exporting products or licensing foreign firms as a mode of exploiting their competitive technologies abroad. This preference stems from possible market failures in the technology market: the more sophisticated technologies are, the...

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