Foreign Firms, Technological Capabilities and Economic Performance
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Foreign Firms, Technological Capabilities and Economic Performance

Evidence from Africa, Asia and Latin America

Rajah Rasiah

This book employs novel techniques to compare technological capabilities and economic performance in seven countries at varying stages of industrial development: Brazil, Costa Rica, Indonesia, Kenya, Malaysia, South Africa and Uganda. The author uses a methodology drawn from the technology capability framework, but extensively adapts and simplifies it to extract common cross-industry parameters for statistical analysis. He employs the framework to compare the technological, local sourcing and performance dynamics of foreign and local firms in a variety of industries.
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Chapter 3: Technology, local sourcing and economic performance in South Africa

Rajah Rasiah


Rajah Rasiah and Thabo Gopane 3.1 INTRODUCTION South Africa is the largest and richest economy in sub-Saharan Africa. It has enjoyed a long history of inward-oriented industrialisation where firms were forced to manufacture a number of critical goods during the apartheid regime following the imposition of economic sanctions. In addition, unlike most parts of Africa, South Africa enjoys fairly strong effective demand, and basic and science and technology (S&T) infrastructure. Since intensified liberalisation from the 1990s a number of firms have rationalised to orient manufacturing to global markets. Increasing liberalisation had forced considerable rationalisation in South Africa’s manufacturing industry. The auto parts industry has seen the closure of inefficient firms but strong efficiency improvements in the surviving firms from external competition and the widening of markets from exports (Black, 2001). Wood (2003) argued that the liberalisation trend on balance has worked favourably for the textile and garment, auto parts and steel industries in South Africa, but that incoherent policy signals have reduced the potential for attracting FDI into the country. Gelb (2002) provided evidence of positive contributions from the operations of foreign firms. Barnes and Lorentzen (2003) discussed the significance of foreign firms in automobile value chains. This chapter attempts to add to the above literature and offer an African example of a middle-income economy with fairly developed high-tech infrastructure by examining technology, local sourcing and performance of foreign and local firms in the auto parts, electronics, textile and garment, pharmaceutical and food industries in...

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