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Lastres and M. Cheltenham: Edward Elgar, — Baumann, R. Cassiolato, J. Lastres, Maciel eds , Systems of Innovation and Development: Evidence from Brazil. Cheltenham: Edward Elgar. Chesnais, F. Sauviat, Cheltenham: Edward Elgar, 61— Economist , The , Freeman, C.

London: Frances Pinter. Lastres, and M. Perez, Dosi, C. Freeman, R. Nelson, G. Silverberg, and L. Furtado, C. Desenvolvimento e Subdesenvolvimento. Rio de Janeiro: Fundo de Cultura. Capitalismo Global. Herrera, A. Buenos Aires: Paidos, 98— Hirschman, A.

The Strategy of Economic Development. New Haven: Yale University Press. Johnson, B. Lundvall, Lastres, H. London: Macmillan. Cassiolato, Cassiolato and M. Maciel, Cheltenham: Edward Elgar, 1— Lundvall, B. Soete eds , Technical Change and Economic Theory. London: Pinter, — London: Pinter. E Cassiolato and V. London: Anthem Press, xv—xxi. Myrdal, G. London: Penguin Books. Mytelka, L. Farinelli, Perez, C. Freeman and B. London: Pinter, 85— Ravallion, M. Washington DC: World Bank.

Robins, N. New Delhi: Routledge, 1— Schumpeter, J. New Jersey: Transaction Books. New Delhi: Routledge, 19— Geneva; New York: United Nations. United Nations United Nations, Wilson, Dominic and Raluca Dragusanu, World Bank, Foreign direct investment FDI is an important facet of the globalisation process. In , FDI stock corresponded to approximately 6.

Stock and flows of FDI are not homogeneously distributed among nations, and important changes have been observed in the last 20 years. Such situation changed radically in recent years: in , There have been other important new trends regarding FDI in the last 20 years Tables 1. First, rates of FDI growth since the early s have been more than twice the rate of world investment 1 which signals the increasing importance of TNCs in the world economy.

Table 1. Within the group of TNCs, a small number of firms dominate. Of the 82, largest TNCs, the top account for 10 per cent of foreign assets, 16 per cent of foreign sales and 12 per cent of the foreign employment Serfati The international trade between subsidiaries and parent companies represented, in , 60 per cent of the world trade. Such figures demonstrate a significant increase in the degree of internationalisation of the world economy and on the importance of TNCs.

The influence of large TNCs in technology and innovation is even more compelling. Their technological activities seem to be strongly concentrated on parent companies. In fact, the growing importance of TNCs in the recent globalisation process has renewed an old debate. Several advocates of the liberal globalisation have stressed that attracting TNCs to developing countries may allow access to technologies of advanced countries.

By facilitating the entry and stimulating investments of these enterprises, developing nations would benefit from technological innovations brought by them and, consequently, increase productivity and improve the quality of their products. For these authors, not only would the use and the acquisition of new technologies be incorporated by subsidiaries, but the generation of technological innovation in these countries would also be stimulated. Others, although not presenting substantial data to demonstrate it, claim that as the technological function of large companies — in particular, the research and development activities — is planned and conducted on a global scale, there is an increasing participation of the subsidiary companies in the global technology effort of TNCs.

It adopts the broad version of the NSI approach. The changes observed in the last 20 years in the importance of TNCs are part of the wider economic and political transformations associated with the globalisation of economic activities and the diffusion of the information and communication technology ICT paradigm.

UNCTAD compiled information about regulations implemented by different governments, which were related to foreign capital either to stimulate their presence or restrict their action in the last 20 years Figure 1. A noticeable trend shows that since the early s till the mids, policy measures introduced by different governments towards TNCs increased substantially and were mostly directed to stimulate FDI and ease TNCs action. Also, as the level of success to attract FDI has been confined to some countries, governments have also started to implement a new kind of policy regime that integrates FDI promotion policies with innovation policy measures aiming at attracting more of higher quality FDI.

The first happened when countries liberalised their FDI regimes and adopted open door policies. Subsequently, policies became more proactive, countries started to use marketing techniques to attract FDI and provided tax incentives and direct subsidies.

Finally, more recently, FDI policies began to include protection of intellectual property, fostering of human resources and strengthening of local research capabilities. However, since then, the total number of policy measures was significantly reduced. Also, although policy measures geared towards encouraging FDI remain predominant, there is a clear tendency towards increasing the proportion of policy mechanisms unfavourable to FDI.

The benefits of FDI for economic development of receiving countries have been extensively discussed both by policy makers and by academic analysts. Paul Streeten pointed out that conflicts between TNCs and local governments can arise if social and private goals are inconsistent, if bargain power of conglomerates are used against national interests and if knowledge brought by TNCs are not relevant or adequate to receiving nations.

Edith Penrose emphasised that FDI can strongly contribute to developing countries, but they are not able to substitute nation states in the promotion of economic development. Stephen Hymer was the first author who tried to theorise the reasons for firms to internationalise production. Starting from neoclassical theories of international economics and industrial organisation — specially the discussion about entry barriers — he suggested that a TNC aiming to produce in another country should own specific assets capable of overcoming natural advantages of domestic firms for example, a special knowledge of the local market, legislation, etc.

Such assets were associated with market power, size and economies of scale, technological capability and access to cheaper financial sources. Figure 1. In particular, he pointed out that a new industrial structure at world level was emerging, underlining a new international division of labour dominated by — large TNCs, and that the effective power of nation states to control their economies was being eroded given the flexibility of TNCs to react to adverse regulations and fiscal or monetary policies Presser The subsequent work on TNCs, unfortunately, and with few exceptions Chesnais , left aside the political economy of TNCs and concentrated on how the international production was organised and materialised using the traditional neoclassical theory of the firm as a starting point.

This main limitation was specifically treated through the concept of the product life cycle. Vernon, in particular, emphasised the adaptive character of local technological efforts. Later on, John H. Dunning tried to integrate several arguments from different theoretical approaches — neoclassical theories of the firm, industrial organisation and international trade, and locational theory — to create his eclectic theory of international production.

In other words, a company should internationalise the use of its specific advantages. Dunning also suggested the existence of four types of motivations that would put a firm into the process of internationalisation: the search for and access to markets; the search for and access to raw materials; the search for efficiency; and the search for strategic assets. It is well known that the first two forms characterised the process of internationalisation of US enterprises after World War II and of the European enterprises which came after the pioneers.

In the last decades, the intensification of the competition that emerged through globalisation increased the strategic importance of the last two forms of internationalisation. The academic debate on TNCs evolved, after Hymer, with an implicit understanding that they are essentially a specific type of firm that could be treated methodologically within the boundaries of the traditional neoclassical theory of the firm. However, the evolution of TNCs in the last decades calls again for a political economy approach.

The argument is that TNCs are now a totally different type of entity as compared with those of the s. In fact, the increasing importance of TNCs in the last 30 years was accompanied by a global restructuring of production activities. TNCs promoted a strong displacement of productive processes, redirecting global production, investment and trade flows. The overall worldwide restructuring of production over the period has been conditioned by internationalisation strategies and management of the production value chain of large TNCs.

The intensity of this process was observed in the evolution of trade and investment flows refer Tables 1. It is, then, necessary to take a more complex understanding of TNCs in present times. More specifically, if it is correct to point out that TNCs have been the most important actors of the globalisation process, it is also true that non-financial TNCs have also been profoundly affected by the evolution of the capitalist system in this period.

Generally, TNCs should be considered within the understanding that capitalism entered in the last 30 years into a financial-dominated accumulation regime where financial markets and, more specifically, stock exchanges are pivotal to growth-enhancing economic mechanisms Chesnais and Sauviat Liberalisation and deregulation have been indispensible prerequisites for the regime and TNCs with institutional investors have been its most important beneficiaries.

As institutional investors, primarily in the US but also in Europe, have been more and more in control of large non-financial TNCs through financial markets particularly the stock market , they have been able to exert pressure on them and eventually reorient their strategies towards the objective of maximising short-run value for stakeholders.

Even if it has been argued that the structure of the control network of TNCs are significantly affecting global market competition and financial stability, to document the extent to which a small number of financial institutions gained control of large non-financial TNCs has been an almost impossible task till recently.

Stefania Vitali, James B. Glattfelder and Stefano Battiston , however, produced the first complete investigation of the architecture of the international ownership network, concluding that a large portion of control flows to a small tightly-knit core of financial institutions. Vitali, Glattfelder and Battiston started with a list of the 43, largest TNCs and were able to identify a network of more than a million ownership ties.

Their astonishing finding is that only top holders accumulate 80 per cent of the asset control over the value of all TNCs. They also uncovered that, despite its small size, the core holds collectively a large fraction of the total network control. Approximately 40 per cent of the control over the economic value of these TNCs in the world is held, via a complicated web of ownership relations, by a group of TNCs in the core, which has almost full control over itself.

Of these TNCs, 75 per cent are financial institutions ibid. The financialisation of the strategies of TNCs is, thus, this process of subordination of their strategies to the needs of valorisation of financial capital mediated by financial markets Montalban Large industrial TNCs became, in fact, financial centres with industrial activities.

Given the power they hold in international trade and production, the widespread connections through which they organise world industries and markets, and their mode of governance, TNCs nowadays represent a category of firms, based upon a centralisation of financial assets and a specific organisational structure Serfati with the core role held by a holding company. As Claude Serfati pointed out, such groups constitute a structure in which financial control dominates industrial activities.

TNCs have long developed financial activities, but they have been given further opportunity to do so in the last two decades. As a consequence, TNCs are characterised, in the financial dominated global accumulation regime, by a relative decline in the importance of production activities with an associated increase in importance of financial activities and the appropriation of value of intangible assets Serfati But as important as the financial revenues have been the income generated from intangible assets.

In this sense, technological innovative activities in TNCs are transformed in relation with their financialisation as evidenced by the rise of their intangible assets. According to the author, they are used by TNCs for various purposes. For one, they act as financing and holding companies on behalf of the non-resident parent company.

Another category of SPEs has ownership of intellectual property rights IPR by their parent companies and collect income in the form of royalties or as fees on licenses. As part of these strategic changes, TNCs have been involved in substantial modification in the management of their global value chains.

Such modification reflected the fragmentation of production processes within global value chains and the growing international sourcing of intermediates. In most cases, new strategies attempted to preserve strategic activities, such as transdivisional research, technology and business intelligence, or development and design, and focused on the lower end of the value chain, the final integration of the product, which is high margins-generating.

Important for such strategic transformations have been two important changes that came about in the last two decades: i a significant broadening of private property rights to a range of intellectual activity, with TNCs becoming more oriented towards the generation of revenues based on their financial and intellectual property rights rather than on the production process itself, with rent-seeking based on IPR patents, brands, etc.

Besides the acquisition of successful start-ups on the NASDAQ and other financial markets, new arrangements for acquiring the output of university research at a low cost relative to its use value have been used. For example, Serfati quotes a study Corrado et al. Case studies support this type of finding. Also trying to find less expensive ways to perform the necessary scientific and technological activities has been high in the agenda of TNCs.

An important exception is the work of Maximilian von Zedtwitz and Oliver Gassmann , which analysed separately the activities of research and development of these companies. In what concerns the technological development activities, although the most important development centres are located near the research centres, the study suggests that they are better distributed, being not only performed in Europe and the USA, but also in Asia, Australia, Africa, and South America.

Such results indicate that more sophisticated technological activities, such as research, would not be performed by TNC subsidiaries, and here the role of national institutions and companies is still of paramount importance. In fact, the concept involves relatively diverse activities, each one with different locational needs. Research activities need access to highly qualified scientific sources university and research institutes. Development activities are related to product design and require teamwork, including a pool of qualified scientists, engineers and technicians.

In most cases, this means the adaptation of new products to local conditions. Alice H. Even considering that the affiliates invest in local learning in order to adapt the products sold domestically according to the preferences of the local consumers, she shows that the complete generation of a truly innovative product or process is almost inexistent. The internationalisation of research activities close to the knowledge frontier may also be a result of the necessity of a firm to improve its knowledge base through technological advantages of the host country.

The authors conclude that in reference to the technological internationalisation, two strategies are followed by these enterprises. In these cases, the objective of firms would be to complement the competitive advantages that they already have, increasing their knowledge stock and capturing externalities generated by local institutions and enterprises. Considering both strategies, the first tends to be followed when firms internationalise their technological activities to other developed countries.

When they orientate themselves to developing nations, it is common that they act in the more dynamic sectors in which these countries are not considered competitive, mainly adopting products from developed countries. Pari Patel points out that affiliates tend to be technologically more active in areas where host countries are relatively weak, or where there is no coincidence between the sectors in which the host country has a technological advantage and a significant presence of foreign firms.

This new division of technological labour reflects the increased internationalisation of technology that, in theory, would benefit developing countries. Even in these cases, the access is concentrated in higher social levels in developing countries. TNCs from different regions of the world present distinct behaviours, considering that they are the result of different social, cultural, political, and institutional contexts, which influence their evolution and strategies Dicken et al.

Arguing against the general belief that globalisation would suggest a blurring of corporate nationalities, Louis W. As pointed out earlier, it was these firms that started after World War II the intense process of inter-nationalisation of capital that has marked capitalism in the last 50 years Hymer However, considering the historical context and geographic neighbourhood, US TNCs were relatively more active in Europe and South America, while Japanese firms guided themselves to Asia.

This database includes information from onwards. Hence, our analysis is concentrated on majority-owned nonbank foreign affiliates, which is available until Unfortunately, more recent data were published only to all majority-owned foreign affiliates, which includes subsidiaries of US banking TNCs and is not the aim of this study. The database permits also to discuss several other dimensions of the relationship between affiliates and parent companies, which helps to elucidate the role of subsidiaries in the productive and technological structure of TNCs.

This indicates that higher wages, such as those connected to technological development, are proportionally more concentrated in parent companies compared to the overall workforce and sales of subsidiaries. In the s, one could observe a clear tendency toward increase in the proportion of workers employed by subsidiaries in relation to workers employed in parent companies. A slight trend of growth could be observed in the s, but it became stronger in the s: the proportion of employment in subsidiaries, compared to parent companies, has increased from This tendency is even stronger in the case of sales: the proportion of sales in subsidiaries, compared to parent companies, has increased from Here, it is possible to conclude that such relation also did not change significantly during the observed years.

In the considered period, this percentage oscillated between 0. In the case of parent companies, the observed percent was significantly higher, being equal or superior to 2. After , it is possible to observe a slight tendency of decrease in technological effort 4 of subsidiaries. Evidently, this confirms the suggestions obtained from the literature review above.

In , these countries absorbed During the period, this participation has been slowly decreased: to The most important is a remarkable shift in direction towards East Asian countries. As shown in Table 1. The other trend occurred in Latin American subsidiaries, which accounted for 2. In the case of these enterprises, some increase throughout the s 4 per cent in and 4. It shows that Brazil and China are the main countries responsible for the mentioned tendencies. However, this amount was not relevant in comparison to the percentage spent in developed nations.

In the case of Brazil, the technological efforts performed by these enterprises, after presenting a tendency of relative increase until , fell again at the end of the s. In , Brazil reached values similar to the ones observed in the beginning of the s. Subsidiaries localised in Russia and South Africa present a very small participation.

The most important change in the tendencies described above occurred from the s. This information further becomes more understandable when confronted with the ones presented in Table 1. In Latin America, since early , the relative share in sales is about 11 per cent. Among the studied countries, the relevance appears once again in the case of China, whose participation was 0.

Brazilian subsidiaries, for example, represented 2. In , these percentages were 3. Among developing nations, China is an exception — in , US affiliates in that country were responsible for 0. In , China represented 2. In order to better clarify this discussion, Table 1. This proportion has been significantly raised in Asia. In China, for example, this indicator of technological effort went up from 0. But the most impressive result can be observed in the Indian case, especially after Its technological efforts rose from 0.

In Brazil, from to , the technological effort saw a steady increase. After this period, this tendency is reverted until and, since then, a partial recovery can be observed. In the mids and in the beginning of , there is an improvement in the technological effort made by subsidiaries in Southeast Asia, to the detriment of those performed in Latin America. Among developing countries, there seems to be a tendency toward transfer of technological effort performed in Latin American countries to the Asian region.

An analysis of Table 1. In Asian and Pacific countries, this kind of employment tends to grow, but until the percentages were still lower than those observed in developed countries. In Latin America and Africa, this variable presents a small reduction during the studied period. However, this proportion is increasing only in India and China. The relation between the average remuneration of the affiliates in BRICS and the average remuneration paid in developed countries was similar when comparing the beginning of the s to the end of the analysed period , except in the cases of India and South Africa.

In these countries, the average remuneration paid for the subsidiaries in the country presented an increasing trend. Even compared to most developing countries, the average amount per employee paid by the subsidiaries in India and China are still relatively modest.

The average remuneration of the subsidiaries in China, for example, represents half of the average remuneration paid by the Brazilian subsidiaries. In association with other characteristics of these countries, this factor can be considered a stimulus to the entry of the TNCs. The relative loss of importance of Brazil is apparently linked to two interrelated movements.

On the one hand, the currency devaluation in explains the abrupt fall that happened in that year. The second reason seems to be related to the stagnation of the Brazilian economy, revealed by the modest GDP growth rates achieved in the last decade. A considerable literature, in part presented below, including case studies and econometric analyses, have been used in order to support the idea that spillover effects promote significant productivity gains for local enterprises.

According to this literature, the technological spillovers based on FDI could occur through demonstration effects, linkages, competition, and work mobility. Other studies cast some doubts on the hypothesis that FDI-receiving countries may substantially benefit from these technological spillovers. Some suggest that these spillovers create insignificant or even negative impacts, due to negative competitive effects.

As most TNCs acquire a dominant market position in host countries, they are able to appropriate a significant part of their specific advantage, avoiding the absorption of knowledge by domestic firms. The most important conclusion of these studies is that most independent affiliates — which are more diversified, orientated to local markets, established through acquisition and not through new direct investments and where the foreign TNC has only minority share — are exactly those which have stronger innovative capability in process and product technologies.

For subsidiaries that are strongly linked to the parent enterprise with total shareholder control by the foreign TNC and with a higher degree of exports, the result is the opposite: these firms increased mostly local marketing and management capabilities, with a lower impact on local process and product technological development.

Several studies performed during the s—s have demonstrated that foreign capital did not have any perceived impact upon the production capabilities of local enterprises. This was the case, for example, of Jozef Konings who analysed the case of different Eastern European countries. Observing the experience in China, C. Wei and Liu present empirical evidence of reverse technological spillovers in the Chinese manufacturing sector, pinpointing the importance of local knowledge.

Besides, intensive competition requires that affiliates increase their capacity to market adaptation and learning. As for crowding-out effects, Amsden suggests that in monopolistic markets, the control of capital makes a difference, since a process of industrialisation initially based on the presence of TNCs can limit the subsequent entry of domestic firms. Moreover, Long argues that due to the higher wages TNCs pay, subsidiaries hire more qualified workers, while local firms have to rely on a less skilled or trained workforce.

This would give subsidiaries a higher competitive position and a disadvantage to domestic enterprises DE. Some studies suggest that the larger the presence and power of TNCs in a given market, the more limited the technological effort accomplished. Therefore, countries in which foreign investment is relatively limited tend to invest more in their own capabilities.

To summarise, in the case of the horizontal spillovers intra-industry to domestic productivity, case studies and sectoral cross-sections present more positive results than the panel data analysis Rojec The evidence of these spillovers is weak if panel data is the methodology employed. The observed results at the firm level, which indicate null or negative spillover, can be related to the effective capacity of the TNCs to protect their technological advantages, avoiding potential spillovers.

Vertical spillovers — based on forward and backward linkages — present more consistent results than horizontal analysis, confirming positive effects on domestic productivity. That is, firms have to be able to take part of spillovers from multinationals in order to improve their productivity. Amy Glass and Kamal Saggi , for example, argue that the technology gap between the host and home countries indicates the absorptive capacity of host country firms.

Local firms are not passive receptors of spillovers. Their strategies and resources are crucial to obtain benefit from the interaction of foreign investors. FDI can contribute to the increase of domestic productivity if the gap between foreign and domestic enterprise were not high Haddad and Harrison ; Kokko and, especially, when domestic enterprises present absorption capacity, which means capacity to recognise the value of the new knowledge, to integrate it in their activities and to utilise them productively.

Technological spillover depends on both firms involved, and it is not achieved automatically. Absorption capacity is related to the presence of human capital, size of the enterprise, infrastructure, business environment, and size of the local economy, among others. The entry of subsidiaries via joint ventures tends to result in stronger spillovers to domestic firms, compared to totally foreign investment Rojec But in general, the results are still ambiguous.

The analysis concluded that suppliers of intermediate goods with technological specialisation and scale economies have a certain degree of autonomy; but local suppliers whose production is based on low cost work have lower bargain power. In this sense, industrial clusters can be an opportunity of direct interaction between firms, making easy the positive spillover and productive specialisation.

It is important to emphasise the limits of these evaluations. Some problems related to data measurement can be found: as sample definition, quality of data and sample, appropriate level of aggregation, measure of productivity spillover, and endogeneity problems in cross section and panel analysis.

In what follows, we want to summarise the main contributions of different chapters. Over almost the entire period, Brazil was the second highest FDI recipient. In the mids, deep structural change in the Brazilian economy propelled a FDI boom — the third in its history. The central government played a key role for attracting FDI, basically through the approval of constitutional amendments that ended public monopoly in sectors such as telecommunications and oil and gas, and removed earlier distinction between Brazilian firms of national and foreign capital.

Such FDI boom in Brazil mostly targeted the services sector, particularly the privatised infrastructure sector telecommunications and electricity. The share of TNC subsidiaries on overall sales of the 18 most important production chains jumped from 36 per cent in to 52 per cent in In the last years, with the end of privatisation, FDI flows have been strongly directed to the primary sector — oil and natural gas extraction and, specially, metallic minerals extraction.

In Russia, the expansion of TNCs has been encouraged by its government, which pursues a policy aimed at providing favourable investment climate and development of investment infrastructure. In order to attract FDI in Russia, the government implements a set of specific measures, with the support of a Foreign Investment Advisory Council FIAC , where the main objective is to create attractive investment climate in Russia, and of a federal law that provides guarantees of equal rights, protection of interests and property to all investors regardless of their ownership.

However, the liberalisation of external economic activities was implemented without taking into account domestic economic realities, and TNCs are generally not ready for large-scale investments in the modernisation of major Russian production facilities whose equipment is mostly obsolete. In India, since the s, policy makers have perceived FDI inflows to be a major source of scarce capital, which is capable of contributing to capital formation, output and employment, and providing access to technology, managerial skills and markets.

Consequently, FDI has become an important form of external financing for India. These include a large number of cases of foreign firms acquiring wholly Indian ones. FDI in sectors designated as high technology is receiving preferential treatment in terms of access to infrastructure, tax incentives and subsidies. The latest policy of FDI promotion practices, as in Brazil, the principle of no discrimination against foreign firms.

In China, on the early stage of reform and opening-up, due to policy restrictions, joint venture and cooperation ventures were the main forms of foreign investment. After the mids, non-financial TNCs began to invest in capital-intensive or technology-intensive areas, and started to emphasise the strategic position of subsidiary companies in China in the global business integration.

The South African economy is nowadays highly favourable to foreign investors, though few national documents currently contain specific references to FDI. Generally, no discrimination is applied against foreign investors except in the banking sector. Besides its favourable TNC context, the country also offers a wide range of incentives to both domestic and foreign direct investors. Sectorally, FDI has been concentrated in the primary sector, notably in mining.

The country is particularly attractive in this regard, given the large stocks and variety of mineral resources on its territory. In general, the analyses in all chapters recognise the influence of TNCs on their economies and the efforts made by their governments in recent decades to stimulate FDI flows.

But the conclusion is that, with minor exceptions, the contribution to BRICS innovation capacity and development has been very limited. The authors conclude that the innovative performance of large domestic enterprises is stronger than the subsidiaries.

Such data suggests that the technological performance of subsidiaries is comparatively still very low. Foreign-owned companies are considered even less innovative than Russian ones. However, a relevant level of innovation activity has been shown by companies jointly owned by Russian and foreign capital, which have been twice as innovative as other types of companies. This trend has spread to the fields of software engineering, chip design bioinformatics and agro-biotechnology.

TNC subsidiaries in India do not focus on technology absorption, but on the customisation of the technologies originated in their headquarters. Besides using the foreign affiliates for the products under development for global markets, TNCs are actively using the instrument of ownership of IPRs to prevent the spillovers from being captured by the domestic entrepreneurs.

In general, MNCs use collaboration for later-stage work to avoid possible infringements. Further, major software firms such as Infosys, Wipro and TCS are under contractual obligation to transfer the ownership of IP created in the host organisation.

Chinese domestic enterprises spend about 0. In sectors such as electronics and telecommunication, office machinery, and electric equipment and machinery, differences between local firms and TNC subsidiaries are particularly high. Health care and aerospace deserve attention in this topic — aerospace has been developed through large defence budget acquisitions in South Africa and a long history of telemetry Kahn Analysing the effects of TNCs on domestic enterprises of BRICS countries, the studies shows that vertical productivity spillovers have been present in some countries and sectoral contexts, but it has been harder to find horizontal productivity spillovers or technological spillovers.

Some crowding-out effects also have been found in specific situations. The Brazilian study concluded for the occurrence of vertical spillovers; positive horizontal effects are found only when locally-owned firms already acquired higher levels of innovative capabilities. Market seeking strategies by TNCs, particularly when combined with high levels of effective protection, have a negative impact in locally-owned firms including those with higher levels of relative efficiency Laplane et al.

Practically all IT companies support training programmes to promote corporate standards for business solutions. In India, the contribution of foreign firms to the activities connected with the processes of upgrading of the NSI was found to be insignificant. The main gainers have been TNCs and their affiliates, which have better access to technology and other intangible assets.

In the case of domestic firms, those who have adopted a strategy of relying on the non-equity route for technology imports against royalty payments are alone reported to have done well. The other domestic firms that have no networking or non-equity strategic alliances have not done well. Further, only when their technology and productivity gap was small in relation to multinational enterprises MNEs have domestic firms done well under liberalisation.

The chapter on India shows that the gains made by the domestic firms in sectors such as pharmaceuticals and automobiles cannot be attributed to the third generation policies of promotion of FDI and innovation. On the contrary, domestic firms could extract better results from the systems of innovation because the government chose to delay external liberalisation in these sectors.

However, the analysis suggests that it is possible, with the use of appropriate obli-gations and restrictions, to develop the connections of domestic STI system with the emerging global institutions in a favourable way. Due to the lack of apparent technology spillover from TNCs to local businesses, the role of TNCs remains controversial in the country.

Researchers have found that there are positive productivity spillovers from foreign firms to their local suppliers in upstream sectors, but when it comes to the effect on domestic innovative technological development, the study was not as optimistic, pointing out the existence of insufficient spillover effect. In many sectors, such as iron and steel, telecommunications, pharmaceuticals, transport equipment, and consumer goods, TNCs have been said to abuse their power position to the detriment of competitors or consumers, crowding out local development.

However, some positive impacts can be seen in the automotive sector, as productivity gains from domestic firms through linkages with TNCs. Their enterprises have presented a relevant degree of inter-nationalisation in recent years, improving their importance to the world economy.

Many companies have increased their investments abroad to diversify the risk associated with operations in the domestic market. Essentially, the main driver of such expansion has been market access e. Some firms e. In particular, BNDES assessed financing schemes abroad and redirected them to potential Brazilian TNCs under very favourable conditions with very long repayment periods and very low spreads.

To some extent, this phenomenon can be attributed to the emergence of Russian TNCs in the fuel and energy sector that took place over recent years. Significant FDI also has been made by Russian telecommunications companies. Nevertheless, in recent years most of the OFDI has been boosted by private companies. In India, since the early s, firms have been induced to expand their multinational operations. The motives for investing abroad are not only market-seeking, but have also expanded to include access to strategic assets and skills overseas, enhancing non-price segment of global competitiveness through establishing trade-supporting infrastructure, and circumventing the effects of emerging trading blocs on a regional basis by gaining insider status.

Indian multinationals draw their ownership advantages from their accumulated production experience, cost-effectiveness of their production processes and other adaptations to imported technologies made with their technological effort, and sometimes with their ability to differentiate products. Since the onset of the latest phase of external liberalisation, the dynamics of the processes of learning, competence building and innovation-making is now getting increasingly grounded in the multinational operations of Indian firms.

However, analyses of the emerging patterns of alliances, acquisitions and collaborations being entered into by the Indian multinationals clearly show that through the FDI-based relationships not many resources could be leveraged by them from the acquisitions and strategic alliances for the upgrading of national processes of technological accumulation. At large, efforts of Indian multinationals have not yet increased the capabilities of development of new products in a significant way.

There exists little encouragement from FDI-based operations for the development of products and systems needed for facing the challenges of socio-technical transitions to be undertaken by the country. The NSI is thus experiencing a liability in the form of distortion in the goals of innovation-making at all levels including public sector research organisations.

Most part of this overseas expansion involves investment in other developing and transition economies, which are the main destinations of Chinese TNCs. The second generation, which emerged after the early s, has diverse ownership structures, including private ownership and foreign participation, and has been presented in competitive manufacturing industries, in particular those related to electronics and information and communication technologies.

The main activities attracting Chinese investments are business activities, trade and natural resources. In recent years, FDI in manufacturing and mining has grown especially fast, accounting for 60 per cent of total Chinese FDI outflows in Because of a lack of core technology, many Chinese firms mainly compete by low value-added products. Most TNCs from South Africa can be categorised into five key categories: mining and energy; transport aviation and road transport ; retail; telecommunications; and financial services.

In the industrial sectors, minerals and energy TNCs dominate, including former State enterprise, Sasol petrochemicals and chemical products , and the many mining giants. Tables 1. From the data presented in these tables, it is interesting to note, first, the significant increase in the number of BRICS TNCs among these top non-EU firms in such a short period. Also worth noting is that, with the exception of the Brazilian aircraft producer Embraer which ranked th in and th in , all other BRICS TNCs increased their relative position in the overall top rankings.

At one extreme, one finds that the only two Russian and sole South African TNCs all belong to the oil and gas sector, which suggests a total dependence on the specialisation in these resource-intensive activities. At the other extreme is China with its 27 TNCs covering a wide spectrum of activities but with an important emphasis on ICT technologies, particularly telecom equipment — Huawei ranked 39th and ZTE ranked 74th in India showed an expected specialisation in pharmaceuticals, auto and parts, and computer services and software, while Brazil remained with Petrobras in oil and gas, Vale in mining, Embraer in aircraft, a large software firm, and individual positive performance in industrial metals, agricultural implements, electrical energy utilities, and chemicals.

In this final section, conclusions drawn from the analysis of studies undertaken in respect of the experience of BRICS are compared with the results of past investigations undertaken into the impact of policies of FDI promotion that late industrialising countries followed. During the pre-globalisation phase, obligations and restrictions placed by governments in respect of access to market, local content and exports played an important role in persuading foreign investors to contribute to innovation processes, technological transformation and structural change in late industrialising countries.

The absence of FDI as a channel for knowledge transfer is also typical of some other Asian catching-up countries that followed suit after Japan, such as Korea Kim , and Taiwan Aw Although to a lesser extent the importance of this factor is also confirmed by the experience of BRICS countries, the achievements of Indian success in pharmaceuticals and Chinese success in telecommunications and electronics shows that governments of these countries still require a policy space to advance the processes of technological accumulation at home.

However, today, policy regimes in developing countries are certainly characterised by a mix that offers more advantage to TNCs as compared to domestic firms. The analysis made in the different chapters of this book shows that the balance of advantages being offered has varied and is not the same in all emerging economies. Studies reported in this book on the experience of upgrading of the systems of innovation in the BRICS countries during the last two to three decades also confirm that the channel of FDI was not a major international source of knowledge and technology transfer at least for sectors that have ultimately proved to be somewhat dynamic in respect of innovation-making.

There is also confirmation that the upgrading of technology had to be carried out mostly through the investment of domestic enterprises. Investigations into the experience of BRICS countries also point out that the governments had to make their domestic enterprises to submit to a policy of conditional access to foreign sources of knowledge and technology and to bring the required discipline to recipient firms for the development of national absorptive capacity.

This policy regime allows a very different set of policy mixes that give total freedom to foreign investors to establish their operations in the domestic space. Foreign investors are allowed to use the national economic and technological space without being subject to any kind of restrictions and obligations. While the balance of advantages being offered to the TNCs is certainly not the same in all countries, definitely the new policy mixes offer greater access to the national knowledge base and markets.

Today, in many countries foreign subsidiaries receive almost the same treatment as what the domestic enterprises got in earlier times from the policy makers. Arguably, it has been suggested that changes in the system of governance of the global economy may have influenced the policies of FDI promotion in this new direction.

Earlier catching-up paths are believed to be no more open to countries on account of the new regime of trade and development as enshrined in the rules of the World Trade Organization WTO. Recently, as factor seeking investments originating from the TNCs of US and Europe have moved into knowledge-intensive activities in a big way, this tendency has been consciously allowed to grow in the emerging economies through the new policy mixes of FDI promotion and supportive innovation policy measures.

While only a small amount of OFDI is being undertaken with the aim of tapping the possibilities arising from it due to the reverse flows from host economies to TNCs, it appears that BRICS TNCs have not been able to realise the impact of reverse flows from host locations through even these investments.

For instance, it appears that the finance required for the new start-ups and spin-offs is still not available in most BRICS countries. Private equity PE and venture capital VC firms are not interested to support the processes of innovation-making by such firms. Most tie-ups and investments are directed towards the objectives of taking over production facilities and establishing marketing and distribution networks.

Although the implications of this experience are slowly making an impact on the options of policy makers of BRICS countries, it is also apparent that they are not yet ready to move to a policy regime in which the innovation policy would be used in a non-neutral manner and positively discriminate the measures of innovation policy in favour of indigenous innovation. It seems that the logic of achievement of higher growth rates is still driving the national states of these countries to practice more of the same pathways of greater integration with the emerging global economy.

There is an uncertainty in respect of the path that they should take to grow in the near future. There is also a lack of clarity regarding costs and benefits of taking to the new pathways for growth. Most of them now measure the level of success in competition by the amount of FDI their respective governments are able to attract in respect of knowledge-intensive activities. In most of the BRICS countries, governments are now in competition to attract FDI for activities such as research and development, design, development and testing, technical support centre, education and training, etc.

FDI in sectors designated as high technology is receiving preferential treatment in terms of access to infrastructure, tax incentives and subsidies in these countries. Governments have become liberal in their approach with regards to encouraging FDI in the sectors connected with IT, software development, biotechnology, pharmaceuticals, and so on.

Being aware that TNCs can offer new production facilities, managerial practices and also technology transfer to host countries, it is necessary that in the new context, policy makers must formulate the policy mixes of FDI promotion and innovation policy measures to succeed in the process of building national capabilities.

After the experience of the global financial crisis, certainly there is again a renewal of interest in dealing with the implications of financial liberalisation for the domestic economies in both developed and developing countries. In the emerging economies, policy makers are engaged in rethinking the policies that were responsible for transmission of the impacts of the global crisis into their economies.

In this context, the role of private equity and venture capital is also required to be reconstituted keeping in view the specific experiences of transmission of the impacts through the instruments of finance on innovation in the emerging economies. Solutions to the problem of how the governments must constitute the mix of policies of FDI promotion and innovation policy measures need to be evolved keeping in view that the systems of innovation can have varying mitigation and transformational capacities due to the existence of their systemic connections with the pathways of growth chosen during the last two decades.

Since the new measures under implementation also belong to the sphere of innovation policy, in the recent period scholars of innovation have begun to actively study the impact of the policy changes on FDI promotion on the National Systems of Innovation. Cheltenham: Edward Elgar. Chesnais, F. Sauviat, Cheltenham: Edward Elgar, 61— Economist , The , Freeman, C. London: Frances Pinter. Lastres, and M. Perez, Dosi, C. Freeman, R. Nelson, G. Silverberg, and L. Furtado, C. Desenvolvimento e Subdesenvolvimento.

Rio de Janeiro: Fundo de Cultura. Capitalismo Global. Herrera, A. Buenos Aires: Paidos, 98— Hirschman, A. The Strategy of Economic Development. New Haven: Yale University Press. Johnson, B. Lundvall, Lastres, H. London: Macmillan. Cassiolato, Cassiolato and M. Maciel, Cheltenham: Edward Elgar, 1— Lundvall, B.

Soete eds , Technical Change and Economic Theory. London: Pinter, — London: Pinter. E Cassiolato and V. London: Anthem Press, xv—xxi. Myrdal, G. London: Penguin Books. Mytelka, L. Farinelli, Perez, C. Freeman and B. London: Pinter, 85— Ravallion, M. Washington DC: World Bank. Robins, N. New Delhi: Routledge, 1— Schumpeter, J. New Jersey: Transaction Books. New Delhi: Routledge, 19— Geneva; New York: United Nations. United Nations United Nations, Wilson, Dominic and Raluca Dragusanu, World Bank, Foreign direct investment FDI is an important facet of the globalisation process.

In , FDI stock corresponded to approximately 6. Stock and flows of FDI are not homogeneously distributed among nations, and important changes have been observed in the last 20 years. Such situation changed radically in recent years: in , There have been other important new trends regarding FDI in the last 20 years Tables 1. First, rates of FDI growth since the early s have been more than twice the rate of world investment 1 which signals the increasing importance of TNCs in the world economy.

Table 1. Within the group of TNCs, a small number of firms dominate. Of the 82, largest TNCs, the top account for 10 per cent of foreign assets, 16 per cent of foreign sales and 12 per cent of the foreign employment Serfati The international trade between subsidiaries and parent companies represented, in , 60 per cent of the world trade. Such figures demonstrate a significant increase in the degree of internationalisation of the world economy and on the importance of TNCs.

The influence of large TNCs in technology and innovation is even more compelling. Their technological activities seem to be strongly concentrated on parent companies. In fact, the growing importance of TNCs in the recent globalisation process has renewed an old debate.

Several advocates of the liberal globalisation have stressed that attracting TNCs to developing countries may allow access to technologies of advanced countries. By facilitating the entry and stimulating investments of these enterprises, developing nations would benefit from technological innovations brought by them and, consequently, increase productivity and improve the quality of their products.

For these authors, not only would the use and the acquisition of new technologies be incorporated by subsidiaries, but the generation of technological innovation in these countries would also be stimulated. Others, although not presenting substantial data to demonstrate it, claim that as the technological function of large companies — in particular, the research and development activities — is planned and conducted on a global scale, there is an increasing participation of the subsidiary companies in the global technology effort of TNCs.

It adopts the broad version of the NSI approach. The changes observed in the last 20 years in the importance of TNCs are part of the wider economic and political transformations associated with the globalisation of economic activities and the diffusion of the information and communication technology ICT paradigm. UNCTAD compiled information about regulations implemented by different governments, which were related to foreign capital either to stimulate their presence or restrict their action in the last 20 years Figure 1.

A noticeable trend shows that since the early s till the mids, policy measures introduced by different governments towards TNCs increased substantially and were mostly directed to stimulate FDI and ease TNCs action. Also, as the level of success to attract FDI has been confined to some countries, governments have also started to implement a new kind of policy regime that integrates FDI promotion policies with innovation policy measures aiming at attracting more of higher quality FDI.

The first happened when countries liberalised their FDI regimes and adopted open door policies. Subsequently, policies became more proactive, countries started to use marketing techniques to attract FDI and provided tax incentives and direct subsidies. Finally, more recently, FDI policies began to include protection of intellectual property, fostering of human resources and strengthening of local research capabilities.

However, since then, the total number of policy measures was significantly reduced. Also, although policy measures geared towards encouraging FDI remain predominant, there is a clear tendency towards increasing the proportion of policy mechanisms unfavourable to FDI. The benefits of FDI for economic development of receiving countries have been extensively discussed both by policy makers and by academic analysts.

Paul Streeten pointed out that conflicts between TNCs and local governments can arise if social and private goals are inconsistent, if bargain power of conglomerates are used against national interests and if knowledge brought by TNCs are not relevant or adequate to receiving nations. Edith Penrose emphasised that FDI can strongly contribute to developing countries, but they are not able to substitute nation states in the promotion of economic development.

Stephen Hymer was the first author who tried to theorise the reasons for firms to internationalise production. Starting from neoclassical theories of international economics and industrial organisation — specially the discussion about entry barriers — he suggested that a TNC aiming to produce in another country should own specific assets capable of overcoming natural advantages of domestic firms for example, a special knowledge of the local market, legislation, etc.

Such assets were associated with market power, size and economies of scale, technological capability and access to cheaper financial sources. Figure 1. In particular, he pointed out that a new industrial structure at world level was emerging, underlining a new international division of labour dominated by — large TNCs, and that the effective power of nation states to control their economies was being eroded given the flexibility of TNCs to react to adverse regulations and fiscal or monetary policies Presser The subsequent work on TNCs, unfortunately, and with few exceptions Chesnais , left aside the political economy of TNCs and concentrated on how the international production was organised and materialised using the traditional neoclassical theory of the firm as a starting point.

This main limitation was specifically treated through the concept of the product life cycle. Vernon, in particular, emphasised the adaptive character of local technological efforts. Later on, John H. Dunning tried to integrate several arguments from different theoretical approaches — neoclassical theories of the firm, industrial organisation and international trade, and locational theory — to create his eclectic theory of international production.

In other words, a company should internationalise the use of its specific advantages. Dunning also suggested the existence of four types of motivations that would put a firm into the process of internationalisation: the search for and access to markets; the search for and access to raw materials; the search for efficiency; and the search for strategic assets.

It is well known that the first two forms characterised the process of internationalisation of US enterprises after World War II and of the European enterprises which came after the pioneers. In the last decades, the intensification of the competition that emerged through globalisation increased the strategic importance of the last two forms of internationalisation.

The academic debate on TNCs evolved, after Hymer, with an implicit understanding that they are essentially a specific type of firm that could be treated methodologically within the boundaries of the traditional neoclassical theory of the firm. However, the evolution of TNCs in the last decades calls again for a political economy approach.

The argument is that TNCs are now a totally different type of entity as compared with those of the s. In fact, the increasing importance of TNCs in the last 30 years was accompanied by a global restructuring of production activities. TNCs promoted a strong displacement of productive processes, redirecting global production, investment and trade flows. The overall worldwide restructuring of production over the period has been conditioned by internationalisation strategies and management of the production value chain of large TNCs.

The intensity of this process was observed in the evolution of trade and investment flows refer Tables 1. It is, then, necessary to take a more complex understanding of TNCs in present times. More specifically, if it is correct to point out that TNCs have been the most important actors of the globalisation process, it is also true that non-financial TNCs have also been profoundly affected by the evolution of the capitalist system in this period.

Generally, TNCs should be considered within the understanding that capitalism entered in the last 30 years into a financial-dominated accumulation regime where financial markets and, more specifically, stock exchanges are pivotal to growth-enhancing economic mechanisms Chesnais and Sauviat Liberalisation and deregulation have been indispensible prerequisites for the regime and TNCs with institutional investors have been its most important beneficiaries.

As institutional investors, primarily in the US but also in Europe, have been more and more in control of large non-financial TNCs through financial markets particularly the stock market , they have been able to exert pressure on them and eventually reorient their strategies towards the objective of maximising short-run value for stakeholders. Even if it has been argued that the structure of the control network of TNCs are significantly affecting global market competition and financial stability, to document the extent to which a small number of financial institutions gained control of large non-financial TNCs has been an almost impossible task till recently.

Stefania Vitali, James B. Glattfelder and Stefano Battiston , however, produced the first complete investigation of the architecture of the international ownership network, concluding that a large portion of control flows to a small tightly-knit core of financial institutions. Vitali, Glattfelder and Battiston started with a list of the 43, largest TNCs and were able to identify a network of more than a million ownership ties.

Their astonishing finding is that only top holders accumulate 80 per cent of the asset control over the value of all TNCs. They also uncovered that, despite its small size, the core holds collectively a large fraction of the total network control. Approximately 40 per cent of the control over the economic value of these TNCs in the world is held, via a complicated web of ownership relations, by a group of TNCs in the core, which has almost full control over itself.

Of these TNCs, 75 per cent are financial institutions ibid. The financialisation of the strategies of TNCs is, thus, this process of subordination of their strategies to the needs of valorisation of financial capital mediated by financial markets Montalban Large industrial TNCs became, in fact, financial centres with industrial activities. Given the power they hold in international trade and production, the widespread connections through which they organise world industries and markets, and their mode of governance, TNCs nowadays represent a category of firms, based upon a centralisation of financial assets and a specific organisational structure Serfati with the core role held by a holding company.

As Claude Serfati pointed out, such groups constitute a structure in which financial control dominates industrial activities. TNCs have long developed financial activities, but they have been given further opportunity to do so in the last two decades. As a consequence, TNCs are characterised, in the financial dominated global accumulation regime, by a relative decline in the importance of production activities with an associated increase in importance of financial activities and the appropriation of value of intangible assets Serfati But as important as the financial revenues have been the income generated from intangible assets.

In this sense, technological innovative activities in TNCs are transformed in relation with their financialisation as evidenced by the rise of their intangible assets. According to the author, they are used by TNCs for various purposes. For one, they act as financing and holding companies on behalf of the non-resident parent company.

Another category of SPEs has ownership of intellectual property rights IPR by their parent companies and collect income in the form of royalties or as fees on licenses. As part of these strategic changes, TNCs have been involved in substantial modification in the management of their global value chains. Such modification reflected the fragmentation of production processes within global value chains and the growing international sourcing of intermediates.

In most cases, new strategies attempted to preserve strategic activities, such as transdivisional research, technology and business intelligence, or development and design, and focused on the lower end of the value chain, the final integration of the product, which is high margins-generating. Important for such strategic transformations have been two important changes that came about in the last two decades: i a significant broadening of private property rights to a range of intellectual activity, with TNCs becoming more oriented towards the generation of revenues based on their financial and intellectual property rights rather than on the production process itself, with rent-seeking based on IPR patents, brands, etc.

Besides the acquisition of successful start-ups on the NASDAQ and other financial markets, new arrangements for acquiring the output of university research at a low cost relative to its use value have been used. For example, Serfati quotes a study Corrado et al. Case studies support this type of finding. Also trying to find less expensive ways to perform the necessary scientific and technological activities has been high in the agenda of TNCs. An important exception is the work of Maximilian von Zedtwitz and Oliver Gassmann , which analysed separately the activities of research and development of these companies.

In what concerns the technological development activities, although the most important development centres are located near the research centres, the study suggests that they are better distributed, being not only performed in Europe and the USA, but also in Asia, Australia, Africa, and South America. Such results indicate that more sophisticated technological activities, such as research, would not be performed by TNC subsidiaries, and here the role of national institutions and companies is still of paramount importance.

In fact, the concept involves relatively diverse activities, each one with different locational needs. Research activities need access to highly qualified scientific sources university and research institutes. Development activities are related to product design and require teamwork, including a pool of qualified scientists, engineers and technicians.

In most cases, this means the adaptation of new products to local conditions. Alice H. Even considering that the affiliates invest in local learning in order to adapt the products sold domestically according to the preferences of the local consumers, she shows that the complete generation of a truly innovative product or process is almost inexistent.

The internationalisation of research activities close to the knowledge frontier may also be a result of the necessity of a firm to improve its knowledge base through technological advantages of the host country. The authors conclude that in reference to the technological internationalisation, two strategies are followed by these enterprises. In these cases, the objective of firms would be to complement the competitive advantages that they already have, increasing their knowledge stock and capturing externalities generated by local institutions and enterprises.

Considering both strategies, the first tends to be followed when firms internationalise their technological activities to other developed countries. When they orientate themselves to developing nations, it is common that they act in the more dynamic sectors in which these countries are not considered competitive, mainly adopting products from developed countries. Pari Patel points out that affiliates tend to be technologically more active in areas where host countries are relatively weak, or where there is no coincidence between the sectors in which the host country has a technological advantage and a significant presence of foreign firms.

This new division of technological labour reflects the increased internationalisation of technology that, in theory, would benefit developing countries. Even in these cases, the access is concentrated in higher social levels in developing countries. TNCs from different regions of the world present distinct behaviours, considering that they are the result of different social, cultural, political, and institutional contexts, which influence their evolution and strategies Dicken et al.

Arguing against the general belief that globalisation would suggest a blurring of corporate nationalities, Louis W. As pointed out earlier, it was these firms that started after World War II the intense process of inter-nationalisation of capital that has marked capitalism in the last 50 years Hymer However, considering the historical context and geographic neighbourhood, US TNCs were relatively more active in Europe and South America, while Japanese firms guided themselves to Asia.

This database includes information from onwards. Hence, our analysis is concentrated on majority-owned nonbank foreign affiliates, which is available until Unfortunately, more recent data were published only to all majority-owned foreign affiliates, which includes subsidiaries of US banking TNCs and is not the aim of this study. The database permits also to discuss several other dimensions of the relationship between affiliates and parent companies, which helps to elucidate the role of subsidiaries in the productive and technological structure of TNCs.

This indicates that higher wages, such as those connected to technological development, are proportionally more concentrated in parent companies compared to the overall workforce and sales of subsidiaries. In the s, one could observe a clear tendency toward increase in the proportion of workers employed by subsidiaries in relation to workers employed in parent companies. A slight trend of growth could be observed in the s, but it became stronger in the s: the proportion of employment in subsidiaries, compared to parent companies, has increased from This tendency is even stronger in the case of sales: the proportion of sales in subsidiaries, compared to parent companies, has increased from Here, it is possible to conclude that such relation also did not change significantly during the observed years.

In the considered period, this percentage oscillated between 0. In the case of parent companies, the observed percent was significantly higher, being equal or superior to 2. After , it is possible to observe a slight tendency of decrease in technological effort 4 of subsidiaries. Evidently, this confirms the suggestions obtained from the literature review above.

In , these countries absorbed During the period, this participation has been slowly decreased: to The most important is a remarkable shift in direction towards East Asian countries. As shown in Table 1. The other trend occurred in Latin American subsidiaries, which accounted for 2. In the case of these enterprises, some increase throughout the s 4 per cent in and 4.

It shows that Brazil and China are the main countries responsible for the mentioned tendencies. However, this amount was not relevant in comparison to the percentage spent in developed nations. In the case of Brazil, the technological efforts performed by these enterprises, after presenting a tendency of relative increase until , fell again at the end of the s.

In , Brazil reached values similar to the ones observed in the beginning of the s. Subsidiaries localised in Russia and South Africa present a very small participation. The most important change in the tendencies described above occurred from the s. This information further becomes more understandable when confronted with the ones presented in Table 1. In Latin America, since early , the relative share in sales is about 11 per cent. Among the studied countries, the relevance appears once again in the case of China, whose participation was 0.

Brazilian subsidiaries, for example, represented 2. In , these percentages were 3. Among developing nations, China is an exception — in , US affiliates in that country were responsible for 0. In , China represented 2. In order to better clarify this discussion, Table 1.

This proportion has been significantly raised in Asia. In China, for example, this indicator of technological effort went up from 0. But the most impressive result can be observed in the Indian case, especially after Its technological efforts rose from 0. In Brazil, from to , the technological effort saw a steady increase. After this period, this tendency is reverted until and, since then, a partial recovery can be observed. In the mids and in the beginning of , there is an improvement in the technological effort made by subsidiaries in Southeast Asia, to the detriment of those performed in Latin America.

Among developing countries, there seems to be a tendency toward transfer of technological effort performed in Latin American countries to the Asian region. An analysis of Table 1. In Asian and Pacific countries, this kind of employment tends to grow, but until the percentages were still lower than those observed in developed countries. In Latin America and Africa, this variable presents a small reduction during the studied period.

However, this proportion is increasing only in India and China. The relation between the average remuneration of the affiliates in BRICS and the average remuneration paid in developed countries was similar when comparing the beginning of the s to the end of the analysed period , except in the cases of India and South Africa. In these countries, the average remuneration paid for the subsidiaries in the country presented an increasing trend.

Even compared to most developing countries, the average amount per employee paid by the subsidiaries in India and China are still relatively modest. The average remuneration of the subsidiaries in China, for example, represents half of the average remuneration paid by the Brazilian subsidiaries. In association with other characteristics of these countries, this factor can be considered a stimulus to the entry of the TNCs.

The relative loss of importance of Brazil is apparently linked to two interrelated movements. On the one hand, the currency devaluation in explains the abrupt fall that happened in that year. The second reason seems to be related to the stagnation of the Brazilian economy, revealed by the modest GDP growth rates achieved in the last decade.

A considerable literature, in part presented below, including case studies and econometric analyses, have been used in order to support the idea that spillover effects promote significant productivity gains for local enterprises. According to this literature, the technological spillovers based on FDI could occur through demonstration effects, linkages, competition, and work mobility.

Other studies cast some doubts on the hypothesis that FDI-receiving countries may substantially benefit from these technological spillovers. Some suggest that these spillovers create insignificant or even negative impacts, due to negative competitive effects. As most TNCs acquire a dominant market position in host countries, they are able to appropriate a significant part of their specific advantage, avoiding the absorption of knowledge by domestic firms.

The most important conclusion of these studies is that most independent affiliates — which are more diversified, orientated to local markets, established through acquisition and not through new direct investments and where the foreign TNC has only minority share — are exactly those which have stronger innovative capability in process and product technologies. For subsidiaries that are strongly linked to the parent enterprise with total shareholder control by the foreign TNC and with a higher degree of exports, the result is the opposite: these firms increased mostly local marketing and management capabilities, with a lower impact on local process and product technological development.

Several studies performed during the s—s have demonstrated that foreign capital did not have any perceived impact upon the production capabilities of local enterprises. This was the case, for example, of Jozef Konings who analysed the case of different Eastern European countries. Observing the experience in China, C. Wei and Liu present empirical evidence of reverse technological spillovers in the Chinese manufacturing sector, pinpointing the importance of local knowledge.

Besides, intensive competition requires that affiliates increase their capacity to market adaptation and learning. As for crowding-out effects, Amsden suggests that in monopolistic markets, the control of capital makes a difference, since a process of industrialisation initially based on the presence of TNCs can limit the subsequent entry of domestic firms. Moreover, Long argues that due to the higher wages TNCs pay, subsidiaries hire more qualified workers, while local firms have to rely on a less skilled or trained workforce.

This would give subsidiaries a higher competitive position and a disadvantage to domestic enterprises DE. Some studies suggest that the larger the presence and power of TNCs in a given market, the more limited the technological effort accomplished. Therefore, countries in which foreign investment is relatively limited tend to invest more in their own capabilities. To summarise, in the case of the horizontal spillovers intra-industry to domestic productivity, case studies and sectoral cross-sections present more positive results than the panel data analysis Rojec The evidence of these spillovers is weak if panel data is the methodology employed.

The observed results at the firm level, which indicate null or negative spillover, can be related to the effective capacity of the TNCs to protect their technological advantages, avoiding potential spillovers. Vertical spillovers — based on forward and backward linkages — present more consistent results than horizontal analysis, confirming positive effects on domestic productivity.

That is, firms have to be able to take part of spillovers from multinationals in order to improve their productivity. Amy Glass and Kamal Saggi , for example, argue that the technology gap between the host and home countries indicates the absorptive capacity of host country firms.

Local firms are not passive receptors of spillovers. Their strategies and resources are crucial to obtain benefit from the interaction of foreign investors. FDI can contribute to the increase of domestic productivity if the gap between foreign and domestic enterprise were not high Haddad and Harrison ; Kokko and, especially, when domestic enterprises present absorption capacity, which means capacity to recognise the value of the new knowledge, to integrate it in their activities and to utilise them productively.

Technological spillover depends on both firms involved, and it is not achieved automatically. Absorption capacity is related to the presence of human capital, size of the enterprise, infrastructure, business environment, and size of the local economy, among others. The entry of subsidiaries via joint ventures tends to result in stronger spillovers to domestic firms, compared to totally foreign investment Rojec But in general, the results are still ambiguous.

The analysis concluded that suppliers of intermediate goods with technological specialisation and scale economies have a certain degree of autonomy; but local suppliers whose production is based on low cost work have lower bargain power. In this sense, industrial clusters can be an opportunity of direct interaction between firms, making easy the positive spillover and productive specialisation. It is important to emphasise the limits of these evaluations. Some problems related to data measurement can be found: as sample definition, quality of data and sample, appropriate level of aggregation, measure of productivity spillover, and endogeneity problems in cross section and panel analysis.

In what follows, we want to summarise the main contributions of different chapters. Over almost the entire period, Brazil was the second highest FDI recipient. In the mids, deep structural change in the Brazilian economy propelled a FDI boom — the third in its history. The central government played a key role for attracting FDI, basically through the approval of constitutional amendments that ended public monopoly in sectors such as telecommunications and oil and gas, and removed earlier distinction between Brazilian firms of national and foreign capital.

Such FDI boom in Brazil mostly targeted the services sector, particularly the privatised infrastructure sector telecommunications and electricity. The share of TNC subsidiaries on overall sales of the 18 most important production chains jumped from 36 per cent in to 52 per cent in In the last years, with the end of privatisation, FDI flows have been strongly directed to the primary sector — oil and natural gas extraction and, specially, metallic minerals extraction.

In Russia, the expansion of TNCs has been encouraged by its government, which pursues a policy aimed at providing favourable investment climate and development of investment infrastructure. In order to attract FDI in Russia, the government implements a set of specific measures, with the support of a Foreign Investment Advisory Council FIAC , where the main objective is to create attractive investment climate in Russia, and of a federal law that provides guarantees of equal rights, protection of interests and property to all investors regardless of their ownership.

However, the liberalisation of external economic activities was implemented without taking into account domestic economic realities, and TNCs are generally not ready for large-scale investments in the modernisation of major Russian production facilities whose equipment is mostly obsolete. In India, since the s, policy makers have perceived FDI inflows to be a major source of scarce capital, which is capable of contributing to capital formation, output and employment, and providing access to technology, managerial skills and markets.

Consequently, FDI has become an important form of external financing for India. These include a large number of cases of foreign firms acquiring wholly Indian ones. FDI in sectors designated as high technology is receiving preferential treatment in terms of access to infrastructure, tax incentives and subsidies. The latest policy of FDI promotion practices, as in Brazil, the principle of no discrimination against foreign firms. In China, on the early stage of reform and opening-up, due to policy restrictions, joint venture and cooperation ventures were the main forms of foreign investment.

After the mids, non-financial TNCs began to invest in capital-intensive or technology-intensive areas, and started to emphasise the strategic position of subsidiary companies in China in the global business integration. The South African economy is nowadays highly favourable to foreign investors, though few national documents currently contain specific references to FDI.

Generally, no discrimination is applied against foreign investors except in the banking sector. Besides its favourable TNC context, the country also offers a wide range of incentives to both domestic and foreign direct investors. Sectorally, FDI has been concentrated in the primary sector, notably in mining. The country is particularly attractive in this regard, given the large stocks and variety of mineral resources on its territory.

In general, the analyses in all chapters recognise the influence of TNCs on their economies and the efforts made by their governments in recent decades to stimulate FDI flows. But the conclusion is that, with minor exceptions, the contribution to BRICS innovation capacity and development has been very limited. The authors conclude that the innovative performance of large domestic enterprises is stronger than the subsidiaries. Such data suggests that the technological performance of subsidiaries is comparatively still very low.

Foreign-owned companies are considered even less innovative than Russian ones. However, a relevant level of innovation activity has been shown by companies jointly owned by Russian and foreign capital, which have been twice as innovative as other types of companies. This trend has spread to the fields of software engineering, chip design bioinformatics and agro-biotechnology.

TNC subsidiaries in India do not focus on technology absorption, but on the customisation of the technologies originated in their headquarters. Besides using the foreign affiliates for the products under development for global markets, TNCs are actively using the instrument of ownership of IPRs to prevent the spillovers from being captured by the domestic entrepreneurs.

In general, MNCs use collaboration for later-stage work to avoid possible infringements. Further, major software firms such as Infosys, Wipro and TCS are under contractual obligation to transfer the ownership of IP created in the host organisation.

Chinese domestic enterprises spend about 0. In sectors such as electronics and telecommunication, office machinery, and electric equipment and machinery, differences between local firms and TNC subsidiaries are particularly high. Health care and aerospace deserve attention in this topic — aerospace has been developed through large defence budget acquisitions in South Africa and a long history of telemetry Kahn Analysing the effects of TNCs on domestic enterprises of BRICS countries, the studies shows that vertical productivity spillovers have been present in some countries and sectoral contexts, but it has been harder to find horizontal productivity spillovers or technological spillovers.

Some crowding-out effects also have been found in specific situations. The Brazilian study concluded for the occurrence of vertical spillovers; positive horizontal effects are found only when locally-owned firms already acquired higher levels of innovative capabilities. Market seeking strategies by TNCs, particularly when combined with high levels of effective protection, have a negative impact in locally-owned firms including those with higher levels of relative efficiency Laplane et al.

Practically all IT companies support training programmes to promote corporate standards for business solutions. In India, the contribution of foreign firms to the activities connected with the processes of upgrading of the NSI was found to be insignificant. The main gainers have been TNCs and their affiliates, which have better access to technology and other intangible assets.

In the case of domestic firms, those who have adopted a strategy of relying on the non-equity route for technology imports against royalty payments are alone reported to have done well. The other domestic firms that have no networking or non-equity strategic alliances have not done well. Further, only when their technology and productivity gap was small in relation to multinational enterprises MNEs have domestic firms done well under liberalisation.

The chapter on India shows that the gains made by the domestic firms in sectors such as pharmaceuticals and automobiles cannot be attributed to the third generation policies of promotion of FDI and innovation. On the contrary, domestic firms could extract better results from the systems of innovation because the government chose to delay external liberalisation in these sectors.

However, the analysis suggests that it is possible, with the use of appropriate obli-gations and restrictions, to develop the connections of domestic STI system with the emerging global institutions in a favourable way. Due to the lack of apparent technology spillover from TNCs to local businesses, the role of TNCs remains controversial in the country. Researchers have found that there are positive productivity spillovers from foreign firms to their local suppliers in upstream sectors, but when it comes to the effect on domestic innovative technological development, the study was not as optimistic, pointing out the existence of insufficient spillover effect.

In many sectors, such as iron and steel, telecommunications, pharmaceuticals, transport equipment, and consumer goods, TNCs have been said to abuse their power position to the detriment of competitors or consumers, crowding out local development. However, some positive impacts can be seen in the automotive sector, as productivity gains from domestic firms through linkages with TNCs.

Their enterprises have presented a relevant degree of inter-nationalisation in recent years, improving their importance to the world economy. Many companies have increased their investments abroad to diversify the risk associated with operations in the domestic market.

Essentially, the main driver of such expansion has been market access e. Some firms e. In particular, BNDES assessed financing schemes abroad and redirected them to potential Brazilian TNCs under very favourable conditions with very long repayment periods and very low spreads. To some extent, this phenomenon can be attributed to the emergence of Russian TNCs in the fuel and energy sector that took place over recent years.

Significant FDI also has been made by Russian telecommunications companies. Nevertheless, in recent years most of the OFDI has been boosted by private companies. In India, since the early s, firms have been induced to expand their multinational operations. The motives for investing abroad are not only market-seeking, but have also expanded to include access to strategic assets and skills overseas, enhancing non-price segment of global competitiveness through establishing trade-supporting infrastructure, and circumventing the effects of emerging trading blocs on a regional basis by gaining insider status.

Indian multinationals draw their ownership advantages from their accumulated production experience, cost-effectiveness of their production processes and other adaptations to imported technologies made with their technological effort, and sometimes with their ability to differentiate products. Since the onset of the latest phase of external liberalisation, the dynamics of the processes of learning, competence building and innovation-making is now getting increasingly grounded in the multinational operations of Indian firms.

However, analyses of the emerging patterns of alliances, acquisitions and collaborations being entered into by the Indian multinationals clearly show that through the FDI-based relationships not many resources could be leveraged by them from the acquisitions and strategic alliances for the upgrading of national processes of technological accumulation.

At large, efforts of Indian multinationals have not yet increased the capabilities of development of new products in a significant way. There exists little encouragement from FDI-based operations for the development of products and systems needed for facing the challenges of socio-technical transitions to be undertaken by the country.

The NSI is thus experiencing a liability in the form of distortion in the goals of innovation-making at all levels including public sector research organisations. Most part of this overseas expansion involves investment in other developing and transition economies, which are the main destinations of Chinese TNCs. The second generation, which emerged after the early s, has diverse ownership structures, including private ownership and foreign participation, and has been presented in competitive manufacturing industries, in particular those related to electronics and information and communication technologies.

The main activities attracting Chinese investments are business activities, trade and natural resources. In recent years, FDI in manufacturing and mining has grown especially fast, accounting for 60 per cent of total Chinese FDI outflows in Because of a lack of core technology, many Chinese firms mainly compete by low value-added products. Most TNCs from South Africa can be categorised into five key categories: mining and energy; transport aviation and road transport ; retail; telecommunications; and financial services.

In the industrial sectors, minerals and energy TNCs dominate, including former State enterprise, Sasol petrochemicals and chemical products , and the many mining giants. Tables 1. From the data presented in these tables, it is interesting to note, first, the significant increase in the number of BRICS TNCs among these top non-EU firms in such a short period. Also worth noting is that, with the exception of the Brazilian aircraft producer Embraer which ranked th in and th in , all other BRICS TNCs increased their relative position in the overall top rankings.

At one extreme, one finds that the only two Russian and sole South African TNCs all belong to the oil and gas sector, which suggests a total dependence on the specialisation in these resource-intensive activities. At the other extreme is China with its 27 TNCs covering a wide spectrum of activities but with an important emphasis on ICT technologies, particularly telecom equipment — Huawei ranked 39th and ZTE ranked 74th in India showed an expected specialisation in pharmaceuticals, auto and parts, and computer services and software, while Brazil remained with Petrobras in oil and gas, Vale in mining, Embraer in aircraft, a large software firm, and individual positive performance in industrial metals, agricultural implements, electrical energy utilities, and chemicals.

In this final section, conclusions drawn from the analysis of studies undertaken in respect of the experience of BRICS are compared with the results of past investigations undertaken into the impact of policies of FDI promotion that late industrialising countries followed.

During the pre-globalisation phase, obligations and restrictions placed by governments in respect of access to market, local content and exports played an important role in persuading foreign investors to contribute to innovation processes, technological transformation and structural change in late industrialising countries.

The absence of FDI as a channel for knowledge transfer is also typical of some other Asian catching-up countries that followed suit after Japan, such as Korea Kim , and Taiwan Aw Although to a lesser extent the importance of this factor is also confirmed by the experience of BRICS countries, the achievements of Indian success in pharmaceuticals and Chinese success in telecommunications and electronics shows that governments of these countries still require a policy space to advance the processes of technological accumulation at home.

However, today, policy regimes in developing countries are certainly characterised by a mix that offers more advantage to TNCs as compared to domestic firms. The analysis made in the different chapters of this book shows that the balance of advantages being offered has varied and is not the same in all emerging economies. Studies reported in this book on the experience of upgrading of the systems of innovation in the BRICS countries during the last two to three decades also confirm that the channel of FDI was not a major international source of knowledge and technology transfer at least for sectors that have ultimately proved to be somewhat dynamic in respect of innovation-making.

There is also confirmation that the upgrading of technology had to be carried out mostly through the investment of domestic enterprises. Investigations into the experience of BRICS countries also point out that the governments had to make their domestic enterprises to submit to a policy of conditional access to foreign sources of knowledge and technology and to bring the required discipline to recipient firms for the development of national absorptive capacity.

This policy regime allows a very different set of policy mixes that give total freedom to foreign investors to establish their operations in the domestic space. Foreign investors are allowed to use the national economic and technological space without being subject to any kind of restrictions and obligations. While the balance of advantages being offered to the TNCs is certainly not the same in all countries, definitely the new policy mixes offer greater access to the national knowledge base and markets.

Today, in many countries foreign subsidiaries receive almost the same treatment as what the domestic enterprises got in earlier times from the policy makers. Arguably, it has been suggested that changes in the system of governance of the global economy may have influenced the policies of FDI promotion in this new direction. Earlier catching-up paths are believed to be no more open to countries on account of the new regime of trade and development as enshrined in the rules of the World Trade Organization WTO.

Recently, as factor seeking investments originating from the TNCs of US and Europe have moved into knowledge-intensive activities in a big way, this tendency has been consciously allowed to grow in the emerging economies through the new policy mixes of FDI promotion and supportive innovation policy measures.

While only a small amount of OFDI is being undertaken with the aim of tapping the possibilities arising from it due to the reverse flows from host economies to TNCs, it appears that BRICS TNCs have not been able to realise the impact of reverse flows from host locations through even these investments. For instance, it appears that the finance required for the new start-ups and spin-offs is still not available in most BRICS countries.

Private equity PE and venture capital VC firms are not interested to support the processes of innovation-making by such firms. Most tie-ups and investments are directed towards the objectives of taking over production facilities and establishing marketing and distribution networks.

Although the implications of this experience are slowly making an impact on the options of policy makers of BRICS countries, it is also apparent that they are not yet ready to move to a policy regime in which the innovation policy would be used in a non-neutral manner and positively discriminate the measures of innovation policy in favour of indigenous innovation.

It seems that the logic of achievement of higher growth rates is still driving the national states of these countries to practice more of the same pathways of greater integration with the emerging global economy. There is an uncertainty in respect of the path that they should take to grow in the near future. There is also a lack of clarity regarding costs and benefits of taking to the new pathways for growth.

Most of them now measure the level of success in competition by the amount of FDI their respective governments are able to attract in respect of knowledge-intensive activities. In most of the BRICS countries, governments are now in competition to attract FDI for activities such as research and development, design, development and testing, technical support centre, education and training, etc. FDI in sectors designated as high technology is receiving preferential treatment in terms of access to infrastructure, tax incentives and subsidies in these countries.

Governments have become liberal in their approach with regards to encouraging FDI in the sectors connected with IT, software development, biotechnology, pharmaceuticals, and so on. Being aware that TNCs can offer new production facilities, managerial practices and also technology transfer to host countries, it is necessary that in the new context, policy makers must formulate the policy mixes of FDI promotion and innovation policy measures to succeed in the process of building national capabilities.

After the experience of the global financial crisis, certainly there is again a renewal of interest in dealing with the implications of financial liberalisation for the domestic economies in both developed and developing countries. In the emerging economies, policy makers are engaged in rethinking the policies that were responsible for transmission of the impacts of the global crisis into their economies.

In this context, the role of private equity and venture capital is also required to be reconstituted keeping in view the specific experiences of transmission of the impacts through the instruments of finance on innovation in the emerging economies.

Solutions to the problem of how the governments must constitute the mix of policies of FDI promotion and innovation policy measures need to be evolved keeping in view that the systems of innovation can have varying mitigation and transformational capacities due to the existence of their systemic connections with the pathways of growth chosen during the last two decades.

Since the new measures under implementation also belong to the sphere of innovation policy, in the recent period scholars of innovation have begun to actively study the impact of the policy changes on FDI promotion on the National Systems of Innovation.

In the field of innovation studies, focus is back on the study of contribution of FDI to the processes of technological change and innovation making Fagerberg and Srholec Experience of the implementation of the third generation policies of FDI promotion and innovation-making is clear that the pathways of growth constituted during the period of liberalisation were by themselves certainly insufficient for the introduction of major innovations.

By shaping the institutions and incentives in the same direction for market and non-market actors, the narrowly defined pathways of growth were instrumental in not allowing their processes of competence building and innovation-making to go beyond outsourcing activities and exports to regulated markets in select product segments.

Demand-side signals for the activities of innovation of both non-market and market actors were not helpful for the efforts to be undertaken for the benefit of indigenous innovation. It is apparent that policy coordination would need to appropriately focus on the management of the interplay of global push and domestic pull factors. It cannot be ruled out that in the absence of suitable policy coordination, domestically developed expertise may get used far more for the development of global networks of production and innovation for the benefit of the world market.

Alliance building and interactions of domestic and foreign firms need regular monitoring with the aim of not only undertaking programmes and policies to take benefit of the possible realisation of spillover, linkage, competition, and demonstration effects, but also to prevent and minimise the liabilities and distortions being experienced by the systems of innovation in the presence of greater FDI.

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RIDGE CAPITAL INVESTMENTS MONTEREY CA

As the behaviour of the economic variables relies on parameters that are defined and evolve into a specific historical context, it is quite difficult to isolate the study of economic phenomena from its historical frame of reference Furtado This assertion is more significant when analysing economic, social and technological systems that are different from each other, as in the underdeveloped economies. In this context, underdevelopment may not, and should not, be considered as an anomaly or simply a backward state.

Underdevelopment may be identified as a functioning pattern and specific evolution of some economies. Social and economical peripheral structure determines a specific manner under which structural change occurs industrialisation during the s and s and technical progress is introduced. Hence different outcomes from those in developed countries are to be expected Furtado ; Rodriguez The neo-Schumpeterian perspective also argues that economic development is considered a systemic phenomenon, generated and sustained not only by inter-firm relations, but most significantly by a complex inter-institutional network of relations.

Innovation is eminently a social process. Therefore, development — resulting from the introduction and diffusion of new technologies — may be considered as the outcome of cumulative trajectories historically built up according to institutional specificities and specialisation patterns inherent to a determined country, region or sector. Each country follows its own development trajectory according to its specificities and possibilities, depending fundamentally on their hierarchical and power position in the world capitalist system.

The more distant underdeveloped countries are from the technological frontier, the larger will be the barriers to an innovative insertion in the new technological paradigm. More serious than technological asymmetries are knowledge and learning asymmetries, with the implication that access, understanding, absorption, domination, use and diffusion of knowledge become impossible.

This occurs because the learning process depends on the existence of innovative and productive capabilities that are not always available. On this aspect, Arocena and Sutz argue that there are clearly learning divides between North and South that are perhaps the main problem of underdevelopment nowadays. Collectively, they were home to Moreover, it is the recent performance of these economies and their macroeconomic indicators that make them more and more the focus of surveillance and analysis.

In , the five countries accounted for Their share increased to Large domestic markets, proactive investment policies, monetary and tax policies with anti-cyclic capacity, presence of major public banks, and high level of reserves are elements increasingly recognised as having helped at least some BRICS economies to be less affected by the crisis.

While growth slowed in all major regions, China and India continued to grow rapidly in and Table 1. In Brazil, the GDP fell 0. South Africa showed a GDP decrease by 1. In Russia, heavily dependent on commodities like oil and gas, the economy has been hit more severely by the global crisis. It experienced shrinking of almost 8 per cent in but the GDP growth recovered to 3. Prospects for show the five economies representing The economic performance of the BRICS countries has, however, varied widely during the last decades as shown in Table 1.

China has maintained its position as the fastest growing economy worldwide. India has also grown significantly and regularly. Brazil has had an irregular performance, well below its potential, but showed an enhancement in the second half of the s. Russia, after the severe s crisis that resulted in a decline of 40 per cent in its real GDP, has recovered and South Africa has had a small improvement in its economic performance that remains below its potential.

These different performances were accompanied by significant changes in the productive structure of the five countries, which reflect dissimilar development strategies. In contrast, in , The relative share of the agricultural sector, which accounted for The share of services grew from In , it represented 3. China has diversified its industrial system to a significant degree during the last 25 years and the share of technologically intensive sectors in industrial output in reached 42 per cent of the total value added by the manufacturing sector.

In the other four countries this share is around 15 per cent. Brazil has gone through a structural transformation since the late s, with a significant reduction of the share of industry in total GDP declining from In Brazil, as in Russia and South Africa, the products based on natural resources and commodities have a relatively greater share of national GDP than in China and India.

As in Brazil, the contribution of manufacturing sector to GDP in Russia has declined since the s, decreasing from The share of defence-related industrial complex in manufacturing is significant, together with the strong production base in non-electric machines and equipment. The oil and gas industry alone accounts for more than 10 per cent of the gross value added.

The share of services in total GDP has grown in the last two decades achieving The Indian economy is essentially service-led. Skills in the manufacturing sector are relatively modest and concentrated in non-durable consumer goods and in the chemical-pharmaceutical complex. However, some manufacturing segments in the automobile complex and in certain basic industries have been developing rapidly in recent years.

The share of services in GDP has grown from 39 per cent in to The services sector has also been playing a more important role in the South African economy. The share of this sector in GDP was The development of the financial sector and the growth of tourism have contributed to this growth. Finance, real estate and business services are expanding their share with regard to government services. The share of industry-added value in total GDP value decreased from The metal and engineering sectors dominate the manufacturing sector.

The minerals and mining sector remains important also with respect to both employment and foreign trade. The changes observed in the participation of BRICS countries in international trade were even more significant Table 2. Their share in merchandise trade value more than doubled in the short period of —, exports rising from 7.

However, the contribution of the five countries varied significantly. The most notable fact is the well-known growth of China in the merchandise trade value: its exports mounted from 3. India also experienced a sharp increase of exports, reaching 1. Fostered by Chinese growth and commodities boom, the share of Brazil and Russia in world exports grew rapidly from to , increasing almost four times. On the import side, India and Russia increased their share in world imports more than fivefold.

In India inflows on account of invisibles have been helpful in financing the growing deficit in merchandise trade. The BRICS economies have significantly increased their openness to international trade in the last decades. They have raised their exports and imports both in volume terms as a share of GDP, but the level of trade openness has varied quite a lot Table 3.

The greater changes occurred in China and India, particularly since the s when they speeded up their international trade flows. The Brazilian economy, despite the liberalisation process in the s, remains the most closed amongst the BRICS countries. However, since the first half of the s there was a widespread increase of exports and imports flows between the five economies, but particularly a stronger presence of China as an important trade pole for the other four countries Baumann In , China surpassed the United States as the main trade partner of Brazil and also emerged as the second main trade partner of India and Russia.

China exports to Brazil, India, Russia, and South Africa at a more intense pace than it imports from them. Therefore, despite the fact that intra-BRICS trade has increased in recent years, the flows are still restricted in size and unbalanced in terms of the different rhythms and compositions of the BRICS bilateral commercial transactions. Although China has surpassed Brazil since , Brazil continued to be a major destination for FDI during the s, most notably during the process of privatisation that took place during that decade.

Particularly remarkable has been the Chinese policy to attract multinational companies since the beginning of the s. Brazil, Russia and South Africa — countries that liberalised their economies with few restrictions — got more portfolio investment, but most of the investment received by the manufacturing sector was used to buy up local companies.

In China and India, where the capital account was not liberalised, FDI seems to have been concentrated in new investments in production and innovation. Other relevant macroeconomic indicators could be added — such as the impressive share of BRICS in international monetary reserves about 40 per cent of the total — but the interest in these five emerging economies goes beyond this area.

Together with their expanding economic relevance, these countries are claiming a rising geopolitical influence. They have been important players in their geographic areas of influence. However, they are pushing to have an increasing voice in the international high-level decision-making institutions, particularly through reforms in the UN system and in the Bretton Woods organisations.

Their growing leverage in international relations together with other emerging countries is associated with a repositioning of the balance of power on the world stage, which was intensified by the recent world crisis. BRICS countries want to see these changes reflected in the institutions of global governance. Since their economies will probably continue to account for a sizeable portion of the increase in global GDP in the near future, it is expected over time that BRICS will exert increasing financial and political influence, even if limited by their considerable differences and constraints to form a coherent political bloc anytime soon.

The increased influence of these countries took place during a period marked by intense transformations in the global society. One of these remarkable changes is the integration in the economy of a significant portion of previously marginalised segments of the BRICS population.

The highly populated China and India led this process in terms of world shares, but Brazil also had an important participation Soares and Podcameni One of them is the growing social gap caused by the unequal distribution of recent economic growth. While the percentage of the population below the poverty line has decreased over the past 30 years in most of the BRICS countries, inequality is still a major issue for these economies.

In fact, the BRICS countries, except Brazil, show a trend of increasing income inequality that — particularly since the s — has been following the rapid economic growth. Moreover, despite the improvements in recent years, Brazil is still among the countries with the worst distribution of income, together with South Africa that found itself in an even worse situation.

This challenge is exacerbated by race, gender, ethnic, and geographic dimensions and therefore demands more integrated solutions Scerri et al. One of the problems associated with the high poverty levels and the perverse distribution of income is the limited access to quality public services — education, health, housing and infrastructure, safety and security, etc. These problems are common to the five countries, where a significant portion of the population lacks access to essential goods and services, and demand urgent redress.

Other undeniable challenges faced by BRICS are unemployment, poor quality employment and increasing informality. Another evident challenge in all five countries is the huge regional disparity in human and economic development. There is also a large gap between the rural and urban population.

In general, the wealthier regions are those that are more industrialised. Practically 60 per cent of the total GDP of Brazil originates in the states of the southeast. The Chinese economic development model favours the coastal provinces, while other provinces in the interior are much less developed.

In South Africa, economic activity is concentrated in Gauteng province and in the western part of Cape Town. The industrial development of Russia occurred principally around cities such as Moscow, St Petersburg, Nizhny Novgorod, and Ekaterinburg. India also shows significant inequalities between the rich regions to the south and the northern regions of the country as well as between the rural and urban populations. Therefore, regional redistribution of income and access to essential goods and services is another significant challenge that these five countries have in common Scerri et al.

The negative environmental impact of recent growth is another huge challenge to be faced by BRICS countries. South Africa and Brazil are responsible for 1. If we take the example of China, we observe that fossil-fuel CO 2 emissions in the country have more than doubled in the decade alone. Energy efficiency is a big problem in China and energy consumption per product is about 40 per cent higher than in the developed world.

Other environmental problems are also critical. For instance, 40 per cent of river and 75 per cent of lake water is polluted leaving million rural people without clean water. Other than extending the existing problems in BRICS countries, one general and common issue should be emphasised. This relates to the sustainability of its current growth trajectory. This is true in terms of growing inequality, increasing environmental impacts, as well as regional and other imbalances.

However, there are some recent changes that may open better future prospects. All the BRICS countries have an important role to play in shaping the future of the world economy, but China will probably have a more prominent role in this respect. The indigenous innovation goal refers to the efforts to make China less reliant on foreign technology through the building of a new kind of relationship between national and foreign players in the process of developing and using new technologies.

For Brazil, India, Russia, and South Africa, Chinese success may lead to strategies towards strengthening domestic technological capabilities and fostering clean technologies. Nevertheless, the differentiated role of the BRICS countries in the configuration of global power and the global economy will in some way constrain the evolution of BRICS national systems for innovation. In addition, their NSIs are highly dependent on their historical development and on how the different domestic actors interpret global developments as well as how they position themselves in the national and international economies.

Yet, more flexibility for setting up new industrial and technological policies may be expected. An evolutionary approach has been adopted in order to capture the nature of the state in the respective countries and thus understand the historical and ideological basis for its role in the evolution of the NSI in the five countries. As a background, it is argued that debates on the role of the state in the development process, especially since the s, have often focused on the apparent dichotomy between market-driven and state-driven development.

This is a rather wasteful diversion, since it should be accepted as a starting premise that the state is essential to the structural transformation that is required for development. The second book addresses an aspect of the NSI that is normally absent from the discussion: the relation between innovation and inequality. The objectives of the book Inequality and Development Challenges , edited by Maria Clara Couto Soares Brazil , Mario Scerri and Rasigan Maharajh South Africa , were to trace the trends in interpersonal and inter-regional inequality within BRICS in an evolutionary perspective and to analyse the co-evolution of inequality and the innovation system to highlight how the various elements of innovation and the production system and inequality mutually reinforce.

The book is driven to improving our understanding of this issue. The inequality concept is considered in its multi-dimensional character, embracing a phenomenon that goes beyond the mere income dimension and is manifested through forms increasingly complex, including, among others, assets, access to basic services, infrastructure, knowledge, as well as race, gender, ethnic, and geographic dimensions.

The book adopts the broad approach of the NSI to analyse the relations between BRICS innovation systems and inequality, departing from a co-evolutionary view. As shown in the book chapters, innovation can affect inequalities in different ways and through distinct trails that are influenced by national conditions, and shaped by public policy interventions. Although innovation does not constitute the main factor of influence on inequality, it is suggested that distinct strategies for technological change may lead to different outcomes in distributive terms, thus either aggravating or mitigating inequality.

Based on this understanding, the book corroborates the hypothesis that inequalities need to be explicitly taken into account in development strategies since the benefits of science, technology and innovation STI are not automatically distributed equally. Therefore, advancing the comprehension of inter-relations between innovation and inequality may be helpful to find ways to shape the National Innovation Systems so that they reduce rather than increase inequalities.

The third book aims at analysing the contribution of small-and medium-scale enterprises SMEs in the National System of Innovation. In the first place, to provide an overview of the main characteristics of micro, small and medium firms in the Brazilian, Russian, Indian, Chinese, and South African National Systems of Innovation as a basis to examine the contribution of SMEs to the economy of each country.

A second goal is to bring to the forefront crucial issues in the discussion of industrial and technological policies for small firms, including the recent evolution and future trends of policies and instruments, their applicability and coordination, as well as a discussion of the macroeconomic, legal and regulatory environment. A final research objective is to draw out initiatives to promote innovation in SMEs that address common bottlenecks in BRICS countries and that can contribute to policy design and implementation by these and other countries.

The book chapters present a detailed presentation of the relation of the position and evolution of TNC in the country. Subsequently, there is a discussion on the local factors affecting innovation by TNCs and local firms in the country. Government policy towards TNCs has been important but as the Chinese experience shows, access to local buoyant markets has also been vital.

Other issues discussed refer to how the government protects local companies from the competition of TNCs. Spillovers of TNCs to local BRICS enterprises have also been analysed and the immediate conclusion is that there is hardly any convincing evidence regarding either the existence or non-existence of spillovers. Finally, the fifth book deals with finance and funding in the National System of Innovation. The objective is to analyse institutional character and support instruments for the innovation financing process in BRICS, focusing on institutional structure and innovation policy.

Pessoa de Matos Brazil contributes to understanding the varied approaches to the financing of innovation. It draws on the experience of five diverse countries each of which has undergone dramatic structural adjustment in the last two to three decades. The experience of the BRICS countries presents a unique set of case studies of the transition from largely closed centrally planned and state-driven economic and science policy to a more open and market-led situation.

The significance of financing investments in innovation has been pointed out as an important structural bottleneck that is yet to be solved by the private financial institutions. If, on the one hand, the internationalisation, deregulation and globalisation of financial markets signals the possibility of resources at lower costs, on the other, the characteristics of investments in innovation such as the length of time needed for development, the uncertainty and the risk, point to the need of setting national institutional arrangements.

This is also true in Latin American countries, where it is being applied and understood in close connection with the basic conceptual ideas of the structuralism approach developed in the region since the s under the influence of the Economic Commission for Latin America and the Caribbean ECLAC.

There are several economic and geopolitical factors that restrict a greater convergence of interests among BRICS countries in multilateral negotiations. The analysis of these constraints goes beyond the limited scope of this concept note, but we could cite the aforementioned relatively low degree of trade complementarities between BRICS as an important one.

In , Gini indexes were respectively 0. According to World Bank statistics, the population below poverty line was It is important to mention that CDIAC-UN data considers only global carbon dioxide emissions from the burning of fossil fuel, but not emissions from deforestation or other greenhouse gases, including methane.

The US Information Technology Office in Beijing refers to indigenous innovation as a term combining three distinct elements: yuanshi original, or genuinely new ; jicheng integrated, or combining existing technologies in new ways ; and yinjin assimilated, or making improvements to imported technologies. Among others, it combined the search for a lower carbon pattern with the offering of better transport conditions for lower income people placed in rural areas, fostering a niche for the development of innovations capable of attending to the specificities of this domestic market segment.

Arocena, R. Sutz, Cassiolato, H. Lastres and M. Cheltenham: Edward Elgar, — Baumann, R. Cassiolato, J. Lastres, Maciel eds , Systems of Innovation and Development: Evidence from Brazil. Cheltenham: Edward Elgar. Chesnais, F. Sauviat, Cheltenham: Edward Elgar, 61— Economist , The , Freeman, C.

London: Frances Pinter. Lastres, and M. Perez, Dosi, C. Freeman, R. Nelson, G. Silverberg, and L. Furtado, C. Desenvolvimento e Subdesenvolvimento. Rio de Janeiro: Fundo de Cultura. Capitalismo Global. Herrera, A. Buenos Aires: Paidos, 98— Hirschman, A. The Strategy of Economic Development. New Haven: Yale University Press. Johnson, B. Lundvall, Lastres, H. London: Macmillan. Cassiolato, Cassiolato and M. Maciel, Cheltenham: Edward Elgar, 1— Lundvall, B.

Soete eds , Technical Change and Economic Theory. London: Pinter, — London: Pinter. E Cassiolato and V. London: Anthem Press, xv—xxi. Myrdal, G. London: Penguin Books. Mytelka, L. Farinelli, Perez, C. Freeman and B. London: Pinter, 85— Ravallion, M.

Washington DC: World Bank. Robins, N. New Delhi: Routledge, 1— Schumpeter, J. New Jersey: Transaction Books. New Delhi: Routledge, 19— Geneva; New York: United Nations. United Nations United Nations, Wilson, Dominic and Raluca Dragusanu, World Bank, Foreign direct investment FDI is an important facet of the globalisation process.

In , FDI stock corresponded to approximately 6. Stock and flows of FDI are not homogeneously distributed among nations, and important changes have been observed in the last 20 years. Such situation changed radically in recent years: in , There have been other important new trends regarding FDI in the last 20 years Tables 1. First, rates of FDI growth since the early s have been more than twice the rate of world investment 1 which signals the increasing importance of TNCs in the world economy.

Table 1. Within the group of TNCs, a small number of firms dominate. Of the 82, largest TNCs, the top account for 10 per cent of foreign assets, 16 per cent of foreign sales and 12 per cent of the foreign employment Serfati The international trade between subsidiaries and parent companies represented, in , 60 per cent of the world trade.

Such figures demonstrate a significant increase in the degree of internationalisation of the world economy and on the importance of TNCs. The influence of large TNCs in technology and innovation is even more compelling.

Their technological activities seem to be strongly concentrated on parent companies. In fact, the growing importance of TNCs in the recent globalisation process has renewed an old debate. Several advocates of the liberal globalisation have stressed that attracting TNCs to developing countries may allow access to technologies of advanced countries.

By facilitating the entry and stimulating investments of these enterprises, developing nations would benefit from technological innovations brought by them and, consequently, increase productivity and improve the quality of their products. For these authors, not only would the use and the acquisition of new technologies be incorporated by subsidiaries, but the generation of technological innovation in these countries would also be stimulated.

Others, although not presenting substantial data to demonstrate it, claim that as the technological function of large companies — in particular, the research and development activities — is planned and conducted on a global scale, there is an increasing participation of the subsidiary companies in the global technology effort of TNCs.

It adopts the broad version of the NSI approach. The changes observed in the last 20 years in the importance of TNCs are part of the wider economic and political transformations associated with the globalisation of economic activities and the diffusion of the information and communication technology ICT paradigm. UNCTAD compiled information about regulations implemented by different governments, which were related to foreign capital either to stimulate their presence or restrict their action in the last 20 years Figure 1.

A noticeable trend shows that since the early s till the mids, policy measures introduced by different governments towards TNCs increased substantially and were mostly directed to stimulate FDI and ease TNCs action. Also, as the level of success to attract FDI has been confined to some countries, governments have also started to implement a new kind of policy regime that integrates FDI promotion policies with innovation policy measures aiming at attracting more of higher quality FDI.

The first happened when countries liberalised their FDI regimes and adopted open door policies. Subsequently, policies became more proactive, countries started to use marketing techniques to attract FDI and provided tax incentives and direct subsidies. Finally, more recently, FDI policies began to include protection of intellectual property, fostering of human resources and strengthening of local research capabilities.

However, since then, the total number of policy measures was significantly reduced. Also, although policy measures geared towards encouraging FDI remain predominant, there is a clear tendency towards increasing the proportion of policy mechanisms unfavourable to FDI. The benefits of FDI for economic development of receiving countries have been extensively discussed both by policy makers and by academic analysts. Paul Streeten pointed out that conflicts between TNCs and local governments can arise if social and private goals are inconsistent, if bargain power of conglomerates are used against national interests and if knowledge brought by TNCs are not relevant or adequate to receiving nations.

Edith Penrose emphasised that FDI can strongly contribute to developing countries, but they are not able to substitute nation states in the promotion of economic development. Stephen Hymer was the first author who tried to theorise the reasons for firms to internationalise production. Starting from neoclassical theories of international economics and industrial organisation — specially the discussion about entry barriers — he suggested that a TNC aiming to produce in another country should own specific assets capable of overcoming natural advantages of domestic firms for example, a special knowledge of the local market, legislation, etc.

Such assets were associated with market power, size and economies of scale, technological capability and access to cheaper financial sources. Figure 1. In particular, he pointed out that a new industrial structure at world level was emerging, underlining a new international division of labour dominated by — large TNCs, and that the effective power of nation states to control their economies was being eroded given the flexibility of TNCs to react to adverse regulations and fiscal or monetary policies Presser The subsequent work on TNCs, unfortunately, and with few exceptions Chesnais , left aside the political economy of TNCs and concentrated on how the international production was organised and materialised using the traditional neoclassical theory of the firm as a starting point.

This main limitation was specifically treated through the concept of the product life cycle. Vernon, in particular, emphasised the adaptive character of local technological efforts. Later on, John H. Dunning tried to integrate several arguments from different theoretical approaches — neoclassical theories of the firm, industrial organisation and international trade, and locational theory — to create his eclectic theory of international production.

In other words, a company should internationalise the use of its specific advantages. Dunning also suggested the existence of four types of motivations that would put a firm into the process of internationalisation: the search for and access to markets; the search for and access to raw materials; the search for efficiency; and the search for strategic assets.

It is well known that the first two forms characterised the process of internationalisation of US enterprises after World War II and of the European enterprises which came after the pioneers. In the last decades, the intensification of the competition that emerged through globalisation increased the strategic importance of the last two forms of internationalisation. The academic debate on TNCs evolved, after Hymer, with an implicit understanding that they are essentially a specific type of firm that could be treated methodologically within the boundaries of the traditional neoclassical theory of the firm.

However, the evolution of TNCs in the last decades calls again for a political economy approach. The argument is that TNCs are now a totally different type of entity as compared with those of the s. In fact, the increasing importance of TNCs in the last 30 years was accompanied by a global restructuring of production activities.

TNCs promoted a strong displacement of productive processes, redirecting global production, investment and trade flows. The overall worldwide restructuring of production over the period has been conditioned by internationalisation strategies and management of the production value chain of large TNCs. The intensity of this process was observed in the evolution of trade and investment flows refer Tables 1. It is, then, necessary to take a more complex understanding of TNCs in present times.

More specifically, if it is correct to point out that TNCs have been the most important actors of the globalisation process, it is also true that non-financial TNCs have also been profoundly affected by the evolution of the capitalist system in this period. Generally, TNCs should be considered within the understanding that capitalism entered in the last 30 years into a financial-dominated accumulation regime where financial markets and, more specifically, stock exchanges are pivotal to growth-enhancing economic mechanisms Chesnais and Sauviat Liberalisation and deregulation have been indispensible prerequisites for the regime and TNCs with institutional investors have been its most important beneficiaries.

As institutional investors, primarily in the US but also in Europe, have been more and more in control of large non-financial TNCs through financial markets particularly the stock market , they have been able to exert pressure on them and eventually reorient their strategies towards the objective of maximising short-run value for stakeholders. Even if it has been argued that the structure of the control network of TNCs are significantly affecting global market competition and financial stability, to document the extent to which a small number of financial institutions gained control of large non-financial TNCs has been an almost impossible task till recently.

Stefania Vitali, James B. Glattfelder and Stefano Battiston , however, produced the first complete investigation of the architecture of the international ownership network, concluding that a large portion of control flows to a small tightly-knit core of financial institutions.

Vitali, Glattfelder and Battiston started with a list of the 43, largest TNCs and were able to identify a network of more than a million ownership ties. Their astonishing finding is that only top holders accumulate 80 per cent of the asset control over the value of all TNCs. They also uncovered that, despite its small size, the core holds collectively a large fraction of the total network control.

Approximately 40 per cent of the control over the economic value of these TNCs in the world is held, via a complicated web of ownership relations, by a group of TNCs in the core, which has almost full control over itself. Of these TNCs, 75 per cent are financial institutions ibid.

The financialisation of the strategies of TNCs is, thus, this process of subordination of their strategies to the needs of valorisation of financial capital mediated by financial markets Montalban Large industrial TNCs became, in fact, financial centres with industrial activities. Given the power they hold in international trade and production, the widespread connections through which they organise world industries and markets, and their mode of governance, TNCs nowadays represent a category of firms, based upon a centralisation of financial assets and a specific organisational structure Serfati with the core role held by a holding company.

As Claude Serfati pointed out, such groups constitute a structure in which financial control dominates industrial activities. TNCs have long developed financial activities, but they have been given further opportunity to do so in the last two decades. As a consequence, TNCs are characterised, in the financial dominated global accumulation regime, by a relative decline in the importance of production activities with an associated increase in importance of financial activities and the appropriation of value of intangible assets Serfati But as important as the financial revenues have been the income generated from intangible assets.

In this sense, technological innovative activities in TNCs are transformed in relation with their financialisation as evidenced by the rise of their intangible assets. According to the author, they are used by TNCs for various purposes. For one, they act as financing and holding companies on behalf of the non-resident parent company.

Another category of SPEs has ownership of intellectual property rights IPR by their parent companies and collect income in the form of royalties or as fees on licenses. As part of these strategic changes, TNCs have been involved in substantial modification in the management of their global value chains. Such modification reflected the fragmentation of production processes within global value chains and the growing international sourcing of intermediates. In most cases, new strategies attempted to preserve strategic activities, such as transdivisional research, technology and business intelligence, or development and design, and focused on the lower end of the value chain, the final integration of the product, which is high margins-generating.

Important for such strategic transformations have been two important changes that came about in the last two decades: i a significant broadening of private property rights to a range of intellectual activity, with TNCs becoming more oriented towards the generation of revenues based on their financial and intellectual property rights rather than on the production process itself, with rent-seeking based on IPR patents, brands, etc.

Besides the acquisition of successful start-ups on the NASDAQ and other financial markets, new arrangements for acquiring the output of university research at a low cost relative to its use value have been used. For example, Serfati quotes a study Corrado et al. Case studies support this type of finding.

Also trying to find less expensive ways to perform the necessary scientific and technological activities has been high in the agenda of TNCs. An important exception is the work of Maximilian von Zedtwitz and Oliver Gassmann , which analysed separately the activities of research and development of these companies. In what concerns the technological development activities, although the most important development centres are located near the research centres, the study suggests that they are better distributed, being not only performed in Europe and the USA, but also in Asia, Australia, Africa, and South America.

Such results indicate that more sophisticated technological activities, such as research, would not be performed by TNC subsidiaries, and here the role of national institutions and companies is still of paramount importance. In fact, the concept involves relatively diverse activities, each one with different locational needs.

Research activities need access to highly qualified scientific sources university and research institutes. Development activities are related to product design and require teamwork, including a pool of qualified scientists, engineers and technicians. In most cases, this means the adaptation of new products to local conditions. Alice H. Even considering that the affiliates invest in local learning in order to adapt the products sold domestically according to the preferences of the local consumers, she shows that the complete generation of a truly innovative product or process is almost inexistent.

The internationalisation of research activities close to the knowledge frontier may also be a result of the necessity of a firm to improve its knowledge base through technological advantages of the host country.

The authors conclude that in reference to the technological internationalisation, two strategies are followed by these enterprises. In these cases, the objective of firms would be to complement the competitive advantages that they already have, increasing their knowledge stock and capturing externalities generated by local institutions and enterprises.

Considering both strategies, the first tends to be followed when firms internationalise their technological activities to other developed countries. When they orientate themselves to developing nations, it is common that they act in the more dynamic sectors in which these countries are not considered competitive, mainly adopting products from developed countries.

Pari Patel points out that affiliates tend to be technologically more active in areas where host countries are relatively weak, or where there is no coincidence between the sectors in which the host country has a technological advantage and a significant presence of foreign firms. This new division of technological labour reflects the increased internationalisation of technology that, in theory, would benefit developing countries. Even in these cases, the access is concentrated in higher social levels in developing countries.

TNCs from different regions of the world present distinct behaviours, considering that they are the result of different social, cultural, political, and institutional contexts, which influence their evolution and strategies Dicken et al. Arguing against the general belief that globalisation would suggest a blurring of corporate nationalities, Louis W.

As pointed out earlier, it was these firms that started after World War II the intense process of inter-nationalisation of capital that has marked capitalism in the last 50 years Hymer However, considering the historical context and geographic neighbourhood, US TNCs were relatively more active in Europe and South America, while Japanese firms guided themselves to Asia.

This database includes information from onwards. Hence, our analysis is concentrated on majority-owned nonbank foreign affiliates, which is available until Unfortunately, more recent data were published only to all majority-owned foreign affiliates, which includes subsidiaries of US banking TNCs and is not the aim of this study.

The database permits also to discuss several other dimensions of the relationship between affiliates and parent companies, which helps to elucidate the role of subsidiaries in the productive and technological structure of TNCs. This indicates that higher wages, such as those connected to technological development, are proportionally more concentrated in parent companies compared to the overall workforce and sales of subsidiaries.

In the s, one could observe a clear tendency toward increase in the proportion of workers employed by subsidiaries in relation to workers employed in parent companies. A slight trend of growth could be observed in the s, but it became stronger in the s: the proportion of employment in subsidiaries, compared to parent companies, has increased from This tendency is even stronger in the case of sales: the proportion of sales in subsidiaries, compared to parent companies, has increased from Here, it is possible to conclude that such relation also did not change significantly during the observed years.

In the considered period, this percentage oscillated between 0. In the case of parent companies, the observed percent was significantly higher, being equal or superior to 2. After , it is possible to observe a slight tendency of decrease in technological effort 4 of subsidiaries. Evidently, this confirms the suggestions obtained from the literature review above. In , these countries absorbed During the period, this participation has been slowly decreased: to The most important is a remarkable shift in direction towards East Asian countries.

As shown in Table 1. The other trend occurred in Latin American subsidiaries, which accounted for 2. In the case of these enterprises, some increase throughout the s 4 per cent in and 4. It shows that Brazil and China are the main countries responsible for the mentioned tendencies. However, this amount was not relevant in comparison to the percentage spent in developed nations. In the case of Brazil, the technological efforts performed by these enterprises, after presenting a tendency of relative increase until , fell again at the end of the s.

In , Brazil reached values similar to the ones observed in the beginning of the s. Subsidiaries localised in Russia and South Africa present a very small participation. The most important change in the tendencies described above occurred from the s. This information further becomes more understandable when confronted with the ones presented in Table 1. In Latin America, since early , the relative share in sales is about 11 per cent. Among the studied countries, the relevance appears once again in the case of China, whose participation was 0.

Brazilian subsidiaries, for example, represented 2. In , these percentages were 3. Among developing nations, China is an exception — in , US affiliates in that country were responsible for 0. In , China represented 2. In order to better clarify this discussion, Table 1. This proportion has been significantly raised in Asia. In China, for example, this indicator of technological effort went up from 0.

But the most impressive result can be observed in the Indian case, especially after Its technological efforts rose from 0. In Brazil, from to , the technological effort saw a steady increase. After this period, this tendency is reverted until and, since then, a partial recovery can be observed.

In the mids and in the beginning of , there is an improvement in the technological effort made by subsidiaries in Southeast Asia, to the detriment of those performed in Latin America. Among developing countries, there seems to be a tendency toward transfer of technological effort performed in Latin American countries to the Asian region. An analysis of Table 1. In Asian and Pacific countries, this kind of employment tends to grow, but until the percentages were still lower than those observed in developed countries.

In Latin America and Africa, this variable presents a small reduction during the studied period. However, this proportion is increasing only in India and China. The relation between the average remuneration of the affiliates in BRICS and the average remuneration paid in developed countries was similar when comparing the beginning of the s to the end of the analysed period , except in the cases of India and South Africa. In these countries, the average remuneration paid for the subsidiaries in the country presented an increasing trend.

For these authors, not only would the use and the acquisition of new technologies be incorporated by subsidiaries, but the generation of technological innovation in these countries would also be stimulated. Others, although not presenting substantial data to demonstrate it, claim that as the technological function of large companies — in particular, the research and development activities — is planned and conducted on a global scale, there is an increasing participation of the subsidiary companies in the global technology effort of TNCs.

It adopts the broad version of the NSI approach. The changes observed in the last 20 years in the importance of TNCs are part of the wider economic and political transformations associated with the globalisation of economic activities and the diffusion of the information and communication technology ICT paradigm.

UNCTAD compiled information about regulations implemented by different governments, which were related to foreign capital either to stimulate their presence or restrict their action in the last 20 years Figure 1. A noticeable trend shows that since the early s till the mids, policy measures introduced by different governments towards TNCs increased substantially and were mostly directed to stimulate FDI and ease TNCs action.

Also, as the level of success to attract FDI has been confined to some countries, governments have also started to implement a new kind of policy regime that integrates FDI promotion policies with innovation policy measures aiming at attracting more of higher quality FDI.

The first happened when countries liberalised their FDI regimes and adopted open door policies. Subsequently, policies became more proactive, countries started to use marketing techniques to attract FDI and provided tax incentives and direct subsidies. Finally, more recently, FDI policies began to include protection of intellectual property, fostering of human resources and strengthening of local research capabilities.

However, since then, the total number of policy measures was significantly reduced. Also, although policy measures geared towards encouraging FDI remain predominant, there is a clear tendency towards increasing the proportion of policy mechanisms unfavourable to FDI.

The benefits of FDI for economic development of receiving countries have been extensively discussed both by policy makers and by academic analysts. Paul Streeten pointed out that conflicts between TNCs and local governments can arise if social and private goals are inconsistent, if bargain power of conglomerates are used against national interests and if knowledge brought by TNCs are not relevant or adequate to receiving nations. Edith Penrose emphasised that FDI can strongly contribute to developing countries, but they are not able to substitute nation states in the promotion of economic development.

Stephen Hymer was the first author who tried to theorise the reasons for firms to internationalise production. Starting from neoclassical theories of international economics and industrial organisation — specially the discussion about entry barriers — he suggested that a TNC aiming to produce in another country should own specific assets capable of overcoming natural advantages of domestic firms for example, a special knowledge of the local market, legislation, etc.

Such assets were associated with market power, size and economies of scale, technological capability and access to cheaper financial sources. Figure 1. In particular, he pointed out that a new industrial structure at world level was emerging, underlining a new international division of labour dominated by — large TNCs, and that the effective power of nation states to control their economies was being eroded given the flexibility of TNCs to react to adverse regulations and fiscal or monetary policies Presser The subsequent work on TNCs, unfortunately, and with few exceptions Chesnais , left aside the political economy of TNCs and concentrated on how the international production was organised and materialised using the traditional neoclassical theory of the firm as a starting point.

This main limitation was specifically treated through the concept of the product life cycle. Vernon, in particular, emphasised the adaptive character of local technological efforts. Later on, John H. Dunning tried to integrate several arguments from different theoretical approaches — neoclassical theories of the firm, industrial organisation and international trade, and locational theory — to create his eclectic theory of international production.

In other words, a company should internationalise the use of its specific advantages. Dunning also suggested the existence of four types of motivations that would put a firm into the process of internationalisation: the search for and access to markets; the search for and access to raw materials; the search for efficiency; and the search for strategic assets.

It is well known that the first two forms characterised the process of internationalisation of US enterprises after World War II and of the European enterprises which came after the pioneers. In the last decades, the intensification of the competition that emerged through globalisation increased the strategic importance of the last two forms of internationalisation. The academic debate on TNCs evolved, after Hymer, with an implicit understanding that they are essentially a specific type of firm that could be treated methodologically within the boundaries of the traditional neoclassical theory of the firm.

However, the evolution of TNCs in the last decades calls again for a political economy approach. The argument is that TNCs are now a totally different type of entity as compared with those of the s. In fact, the increasing importance of TNCs in the last 30 years was accompanied by a global restructuring of production activities. TNCs promoted a strong displacement of productive processes, redirecting global production, investment and trade flows.

The overall worldwide restructuring of production over the period has been conditioned by internationalisation strategies and management of the production value chain of large TNCs. The intensity of this process was observed in the evolution of trade and investment flows refer Tables 1.

It is, then, necessary to take a more complex understanding of TNCs in present times. More specifically, if it is correct to point out that TNCs have been the most important actors of the globalisation process, it is also true that non-financial TNCs have also been profoundly affected by the evolution of the capitalist system in this period. Generally, TNCs should be considered within the understanding that capitalism entered in the last 30 years into a financial-dominated accumulation regime where financial markets and, more specifically, stock exchanges are pivotal to growth-enhancing economic mechanisms Chesnais and Sauviat Liberalisation and deregulation have been indispensible prerequisites for the regime and TNCs with institutional investors have been its most important beneficiaries.

As institutional investors, primarily in the US but also in Europe, have been more and more in control of large non-financial TNCs through financial markets particularly the stock market , they have been able to exert pressure on them and eventually reorient their strategies towards the objective of maximising short-run value for stakeholders.

Even if it has been argued that the structure of the control network of TNCs are significantly affecting global market competition and financial stability, to document the extent to which a small number of financial institutions gained control of large non-financial TNCs has been an almost impossible task till recently. Stefania Vitali, James B. Glattfelder and Stefano Battiston , however, produced the first complete investigation of the architecture of the international ownership network, concluding that a large portion of control flows to a small tightly-knit core of financial institutions.

Vitali, Glattfelder and Battiston started with a list of the 43, largest TNCs and were able to identify a network of more than a million ownership ties. Their astonishing finding is that only top holders accumulate 80 per cent of the asset control over the value of all TNCs. They also uncovered that, despite its small size, the core holds collectively a large fraction of the total network control. Approximately 40 per cent of the control over the economic value of these TNCs in the world is held, via a complicated web of ownership relations, by a group of TNCs in the core, which has almost full control over itself.

Of these TNCs, 75 per cent are financial institutions ibid. The financialisation of the strategies of TNCs is, thus, this process of subordination of their strategies to the needs of valorisation of financial capital mediated by financial markets Montalban Large industrial TNCs became, in fact, financial centres with industrial activities. Given the power they hold in international trade and production, the widespread connections through which they organise world industries and markets, and their mode of governance, TNCs nowadays represent a category of firms, based upon a centralisation of financial assets and a specific organisational structure Serfati with the core role held by a holding company.

As Claude Serfati pointed out, such groups constitute a structure in which financial control dominates industrial activities. TNCs have long developed financial activities, but they have been given further opportunity to do so in the last two decades. As a consequence, TNCs are characterised, in the financial dominated global accumulation regime, by a relative decline in the importance of production activities with an associated increase in importance of financial activities and the appropriation of value of intangible assets Serfati But as important as the financial revenues have been the income generated from intangible assets.

In this sense, technological innovative activities in TNCs are transformed in relation with their financialisation as evidenced by the rise of their intangible assets. According to the author, they are used by TNCs for various purposes. For one, they act as financing and holding companies on behalf of the non-resident parent company. Another category of SPEs has ownership of intellectual property rights IPR by their parent companies and collect income in the form of royalties or as fees on licenses.

As part of these strategic changes, TNCs have been involved in substantial modification in the management of their global value chains. Such modification reflected the fragmentation of production processes within global value chains and the growing international sourcing of intermediates. In most cases, new strategies attempted to preserve strategic activities, such as transdivisional research, technology and business intelligence, or development and design, and focused on the lower end of the value chain, the final integration of the product, which is high margins-generating.

Important for such strategic transformations have been two important changes that came about in the last two decades: i a significant broadening of private property rights to a range of intellectual activity, with TNCs becoming more oriented towards the generation of revenues based on their financial and intellectual property rights rather than on the production process itself, with rent-seeking based on IPR patents, brands, etc.

Besides the acquisition of successful start-ups on the NASDAQ and other financial markets, new arrangements for acquiring the output of university research at a low cost relative to its use value have been used. For example, Serfati quotes a study Corrado et al. Case studies support this type of finding. Also trying to find less expensive ways to perform the necessary scientific and technological activities has been high in the agenda of TNCs. An important exception is the work of Maximilian von Zedtwitz and Oliver Gassmann , which analysed separately the activities of research and development of these companies.

In what concerns the technological development activities, although the most important development centres are located near the research centres, the study suggests that they are better distributed, being not only performed in Europe and the USA, but also in Asia, Australia, Africa, and South America.

Such results indicate that more sophisticated technological activities, such as research, would not be performed by TNC subsidiaries, and here the role of national institutions and companies is still of paramount importance. In fact, the concept involves relatively diverse activities, each one with different locational needs. Research activities need access to highly qualified scientific sources university and research institutes. Development activities are related to product design and require teamwork, including a pool of qualified scientists, engineers and technicians.

In most cases, this means the adaptation of new products to local conditions. Alice H. Even considering that the affiliates invest in local learning in order to adapt the products sold domestically according to the preferences of the local consumers, she shows that the complete generation of a truly innovative product or process is almost inexistent.

The internationalisation of research activities close to the knowledge frontier may also be a result of the necessity of a firm to improve its knowledge base through technological advantages of the host country. The authors conclude that in reference to the technological internationalisation, two strategies are followed by these enterprises.

In these cases, the objective of firms would be to complement the competitive advantages that they already have, increasing their knowledge stock and capturing externalities generated by local institutions and enterprises. Considering both strategies, the first tends to be followed when firms internationalise their technological activities to other developed countries. When they orientate themselves to developing nations, it is common that they act in the more dynamic sectors in which these countries are not considered competitive, mainly adopting products from developed countries.

Pari Patel points out that affiliates tend to be technologically more active in areas where host countries are relatively weak, or where there is no coincidence between the sectors in which the host country has a technological advantage and a significant presence of foreign firms. This new division of technological labour reflects the increased internationalisation of technology that, in theory, would benefit developing countries.

Even in these cases, the access is concentrated in higher social levels in developing countries. TNCs from different regions of the world present distinct behaviours, considering that they are the result of different social, cultural, political, and institutional contexts, which influence their evolution and strategies Dicken et al.

Arguing against the general belief that globalisation would suggest a blurring of corporate nationalities, Louis W. As pointed out earlier, it was these firms that started after World War II the intense process of inter-nationalisation of capital that has marked capitalism in the last 50 years Hymer However, considering the historical context and geographic neighbourhood, US TNCs were relatively more active in Europe and South America, while Japanese firms guided themselves to Asia.

This database includes information from onwards. Hence, our analysis is concentrated on majority-owned nonbank foreign affiliates, which is available until Unfortunately, more recent data were published only to all majority-owned foreign affiliates, which includes subsidiaries of US banking TNCs and is not the aim of this study. The database permits also to discuss several other dimensions of the relationship between affiliates and parent companies, which helps to elucidate the role of subsidiaries in the productive and technological structure of TNCs.

This indicates that higher wages, such as those connected to technological development, are proportionally more concentrated in parent companies compared to the overall workforce and sales of subsidiaries. In the s, one could observe a clear tendency toward increase in the proportion of workers employed by subsidiaries in relation to workers employed in parent companies.

A slight trend of growth could be observed in the s, but it became stronger in the s: the proportion of employment in subsidiaries, compared to parent companies, has increased from This tendency is even stronger in the case of sales: the proportion of sales in subsidiaries, compared to parent companies, has increased from Here, it is possible to conclude that such relation also did not change significantly during the observed years.

In the considered period, this percentage oscillated between 0. In the case of parent companies, the observed percent was significantly higher, being equal or superior to 2. After , it is possible to observe a slight tendency of decrease in technological effort 4 of subsidiaries. Evidently, this confirms the suggestions obtained from the literature review above. In , these countries absorbed During the period, this participation has been slowly decreased: to The most important is a remarkable shift in direction towards East Asian countries.

As shown in Table 1. The other trend occurred in Latin American subsidiaries, which accounted for 2. In the case of these enterprises, some increase throughout the s 4 per cent in and 4. It shows that Brazil and China are the main countries responsible for the mentioned tendencies. However, this amount was not relevant in comparison to the percentage spent in developed nations. In the case of Brazil, the technological efforts performed by these enterprises, after presenting a tendency of relative increase until , fell again at the end of the s.

In , Brazil reached values similar to the ones observed in the beginning of the s. Subsidiaries localised in Russia and South Africa present a very small participation. The most important change in the tendencies described above occurred from the s.

This information further becomes more understandable when confronted with the ones presented in Table 1. In Latin America, since early , the relative share in sales is about 11 per cent. Among the studied countries, the relevance appears once again in the case of China, whose participation was 0.

Brazilian subsidiaries, for example, represented 2. In , these percentages were 3. Among developing nations, China is an exception — in , US affiliates in that country were responsible for 0. In , China represented 2. In order to better clarify this discussion, Table 1. This proportion has been significantly raised in Asia. In China, for example, this indicator of technological effort went up from 0. But the most impressive result can be observed in the Indian case, especially after Its technological efforts rose from 0.

In Brazil, from to , the technological effort saw a steady increase. After this period, this tendency is reverted until and, since then, a partial recovery can be observed. In the mids and in the beginning of , there is an improvement in the technological effort made by subsidiaries in Southeast Asia, to the detriment of those performed in Latin America. Among developing countries, there seems to be a tendency toward transfer of technological effort performed in Latin American countries to the Asian region.

An analysis of Table 1. In Asian and Pacific countries, this kind of employment tends to grow, but until the percentages were still lower than those observed in developed countries. In Latin America and Africa, this variable presents a small reduction during the studied period. However, this proportion is increasing only in India and China. The relation between the average remuneration of the affiliates in BRICS and the average remuneration paid in developed countries was similar when comparing the beginning of the s to the end of the analysed period , except in the cases of India and South Africa.

In these countries, the average remuneration paid for the subsidiaries in the country presented an increasing trend. Even compared to most developing countries, the average amount per employee paid by the subsidiaries in India and China are still relatively modest. The average remuneration of the subsidiaries in China, for example, represents half of the average remuneration paid by the Brazilian subsidiaries. In association with other characteristics of these countries, this factor can be considered a stimulus to the entry of the TNCs.

The relative loss of importance of Brazil is apparently linked to two interrelated movements. On the one hand, the currency devaluation in explains the abrupt fall that happened in that year. The second reason seems to be related to the stagnation of the Brazilian economy, revealed by the modest GDP growth rates achieved in the last decade. A considerable literature, in part presented below, including case studies and econometric analyses, have been used in order to support the idea that spillover effects promote significant productivity gains for local enterprises.

According to this literature, the technological spillovers based on FDI could occur through demonstration effects, linkages, competition, and work mobility. Other studies cast some doubts on the hypothesis that FDI-receiving countries may substantially benefit from these technological spillovers.

Some suggest that these spillovers create insignificant or even negative impacts, due to negative competitive effects. As most TNCs acquire a dominant market position in host countries, they are able to appropriate a significant part of their specific advantage, avoiding the absorption of knowledge by domestic firms. The most important conclusion of these studies is that most independent affiliates — which are more diversified, orientated to local markets, established through acquisition and not through new direct investments and where the foreign TNC has only minority share — are exactly those which have stronger innovative capability in process and product technologies.

For subsidiaries that are strongly linked to the parent enterprise with total shareholder control by the foreign TNC and with a higher degree of exports, the result is the opposite: these firms increased mostly local marketing and management capabilities, with a lower impact on local process and product technological development.

Several studies performed during the s—s have demonstrated that foreign capital did not have any perceived impact upon the production capabilities of local enterprises. This was the case, for example, of Jozef Konings who analysed the case of different Eastern European countries. Observing the experience in China, C. Wei and Liu present empirical evidence of reverse technological spillovers in the Chinese manufacturing sector, pinpointing the importance of local knowledge.

Besides, intensive competition requires that affiliates increase their capacity to market adaptation and learning. As for crowding-out effects, Amsden suggests that in monopolistic markets, the control of capital makes a difference, since a process of industrialisation initially based on the presence of TNCs can limit the subsequent entry of domestic firms.

Moreover, Long argues that due to the higher wages TNCs pay, subsidiaries hire more qualified workers, while local firms have to rely on a less skilled or trained workforce. This would give subsidiaries a higher competitive position and a disadvantage to domestic enterprises DE. Some studies suggest that the larger the presence and power of TNCs in a given market, the more limited the technological effort accomplished.

Therefore, countries in which foreign investment is relatively limited tend to invest more in their own capabilities. To summarise, in the case of the horizontal spillovers intra-industry to domestic productivity, case studies and sectoral cross-sections present more positive results than the panel data analysis Rojec The evidence of these spillovers is weak if panel data is the methodology employed. The observed results at the firm level, which indicate null or negative spillover, can be related to the effective capacity of the TNCs to protect their technological advantages, avoiding potential spillovers.

Vertical spillovers — based on forward and backward linkages — present more consistent results than horizontal analysis, confirming positive effects on domestic productivity. That is, firms have to be able to take part of spillovers from multinationals in order to improve their productivity. Amy Glass and Kamal Saggi , for example, argue that the technology gap between the host and home countries indicates the absorptive capacity of host country firms.

Local firms are not passive receptors of spillovers. Their strategies and resources are crucial to obtain benefit from the interaction of foreign investors. FDI can contribute to the increase of domestic productivity if the gap between foreign and domestic enterprise were not high Haddad and Harrison ; Kokko and, especially, when domestic enterprises present absorption capacity, which means capacity to recognise the value of the new knowledge, to integrate it in their activities and to utilise them productively.

Technological spillover depends on both firms involved, and it is not achieved automatically. Absorption capacity is related to the presence of human capital, size of the enterprise, infrastructure, business environment, and size of the local economy, among others. The entry of subsidiaries via joint ventures tends to result in stronger spillovers to domestic firms, compared to totally foreign investment Rojec But in general, the results are still ambiguous.

The analysis concluded that suppliers of intermediate goods with technological specialisation and scale economies have a certain degree of autonomy; but local suppliers whose production is based on low cost work have lower bargain power. In this sense, industrial clusters can be an opportunity of direct interaction between firms, making easy the positive spillover and productive specialisation. It is important to emphasise the limits of these evaluations. Some problems related to data measurement can be found: as sample definition, quality of data and sample, appropriate level of aggregation, measure of productivity spillover, and endogeneity problems in cross section and panel analysis.

In what follows, we want to summarise the main contributions of different chapters. Over almost the entire period, Brazil was the second highest FDI recipient. In the mids, deep structural change in the Brazilian economy propelled a FDI boom — the third in its history.

The central government played a key role for attracting FDI, basically through the approval of constitutional amendments that ended public monopoly in sectors such as telecommunications and oil and gas, and removed earlier distinction between Brazilian firms of national and foreign capital. Such FDI boom in Brazil mostly targeted the services sector, particularly the privatised infrastructure sector telecommunications and electricity.

The share of TNC subsidiaries on overall sales of the 18 most important production chains jumped from 36 per cent in to 52 per cent in In the last years, with the end of privatisation, FDI flows have been strongly directed to the primary sector — oil and natural gas extraction and, specially, metallic minerals extraction. In Russia, the expansion of TNCs has been encouraged by its government, which pursues a policy aimed at providing favourable investment climate and development of investment infrastructure.

In order to attract FDI in Russia, the government implements a set of specific measures, with the support of a Foreign Investment Advisory Council FIAC , where the main objective is to create attractive investment climate in Russia, and of a federal law that provides guarantees of equal rights, protection of interests and property to all investors regardless of their ownership. However, the liberalisation of external economic activities was implemented without taking into account domestic economic realities, and TNCs are generally not ready for large-scale investments in the modernisation of major Russian production facilities whose equipment is mostly obsolete.

In India, since the s, policy makers have perceived FDI inflows to be a major source of scarce capital, which is capable of contributing to capital formation, output and employment, and providing access to technology, managerial skills and markets. Consequently, FDI has become an important form of external financing for India. These include a large number of cases of foreign firms acquiring wholly Indian ones. FDI in sectors designated as high technology is receiving preferential treatment in terms of access to infrastructure, tax incentives and subsidies.

The latest policy of FDI promotion practices, as in Brazil, the principle of no discrimination against foreign firms. In China, on the early stage of reform and opening-up, due to policy restrictions, joint venture and cooperation ventures were the main forms of foreign investment.

After the mids, non-financial TNCs began to invest in capital-intensive or technology-intensive areas, and started to emphasise the strategic position of subsidiary companies in China in the global business integration. The South African economy is nowadays highly favourable to foreign investors, though few national documents currently contain specific references to FDI.

Generally, no discrimination is applied against foreign investors except in the banking sector. Besides its favourable TNC context, the country also offers a wide range of incentives to both domestic and foreign direct investors. Sectorally, FDI has been concentrated in the primary sector, notably in mining. The country is particularly attractive in this regard, given the large stocks and variety of mineral resources on its territory.

In general, the analyses in all chapters recognise the influence of TNCs on their economies and the efforts made by their governments in recent decades to stimulate FDI flows. But the conclusion is that, with minor exceptions, the contribution to BRICS innovation capacity and development has been very limited. The authors conclude that the innovative performance of large domestic enterprises is stronger than the subsidiaries.

Such data suggests that the technological performance of subsidiaries is comparatively still very low. Foreign-owned companies are considered even less innovative than Russian ones. However, a relevant level of innovation activity has been shown by companies jointly owned by Russian and foreign capital, which have been twice as innovative as other types of companies. This trend has spread to the fields of software engineering, chip design bioinformatics and agro-biotechnology.

TNC subsidiaries in India do not focus on technology absorption, but on the customisation of the technologies originated in their headquarters. Besides using the foreign affiliates for the products under development for global markets, TNCs are actively using the instrument of ownership of IPRs to prevent the spillovers from being captured by the domestic entrepreneurs.

In general, MNCs use collaboration for later-stage work to avoid possible infringements. Further, major software firms such as Infosys, Wipro and TCS are under contractual obligation to transfer the ownership of IP created in the host organisation. Chinese domestic enterprises spend about 0.

In sectors such as electronics and telecommunication, office machinery, and electric equipment and machinery, differences between local firms and TNC subsidiaries are particularly high. Health care and aerospace deserve attention in this topic — aerospace has been developed through large defence budget acquisitions in South Africa and a long history of telemetry Kahn Analysing the effects of TNCs on domestic enterprises of BRICS countries, the studies shows that vertical productivity spillovers have been present in some countries and sectoral contexts, but it has been harder to find horizontal productivity spillovers or technological spillovers.

Some crowding-out effects also have been found in specific situations. The Brazilian study concluded for the occurrence of vertical spillovers; positive horizontal effects are found only when locally-owned firms already acquired higher levels of innovative capabilities. Market seeking strategies by TNCs, particularly when combined with high levels of effective protection, have a negative impact in locally-owned firms including those with higher levels of relative efficiency Laplane et al.

Practically all IT companies support training programmes to promote corporate standards for business solutions. In India, the contribution of foreign firms to the activities connected with the processes of upgrading of the NSI was found to be insignificant. The main gainers have been TNCs and their affiliates, which have better access to technology and other intangible assets. In the case of domestic firms, those who have adopted a strategy of relying on the non-equity route for technology imports against royalty payments are alone reported to have done well.

The other domestic firms that have no networking or non-equity strategic alliances have not done well. Further, only when their technology and productivity gap was small in relation to multinational enterprises MNEs have domestic firms done well under liberalisation.

The chapter on India shows that the gains made by the domestic firms in sectors such as pharmaceuticals and automobiles cannot be attributed to the third generation policies of promotion of FDI and innovation. On the contrary, domestic firms could extract better results from the systems of innovation because the government chose to delay external liberalisation in these sectors. However, the analysis suggests that it is possible, with the use of appropriate obli-gations and restrictions, to develop the connections of domestic STI system with the emerging global institutions in a favourable way.

Due to the lack of apparent technology spillover from TNCs to local businesses, the role of TNCs remains controversial in the country. Researchers have found that there are positive productivity spillovers from foreign firms to their local suppliers in upstream sectors, but when it comes to the effect on domestic innovative technological development, the study was not as optimistic, pointing out the existence of insufficient spillover effect.

In many sectors, such as iron and steel, telecommunications, pharmaceuticals, transport equipment, and consumer goods, TNCs have been said to abuse their power position to the detriment of competitors or consumers, crowding out local development. However, some positive impacts can be seen in the automotive sector, as productivity gains from domestic firms through linkages with TNCs. Their enterprises have presented a relevant degree of inter-nationalisation in recent years, improving their importance to the world economy.

Many companies have increased their investments abroad to diversify the risk associated with operations in the domestic market. Essentially, the main driver of such expansion has been market access e. Some firms e. In particular, BNDES assessed financing schemes abroad and redirected them to potential Brazilian TNCs under very favourable conditions with very long repayment periods and very low spreads.

To some extent, this phenomenon can be attributed to the emergence of Russian TNCs in the fuel and energy sector that took place over recent years. Significant FDI also has been made by Russian telecommunications companies. Nevertheless, in recent years most of the OFDI has been boosted by private companies. In India, since the early s, firms have been induced to expand their multinational operations. The motives for investing abroad are not only market-seeking, but have also expanded to include access to strategic assets and skills overseas, enhancing non-price segment of global competitiveness through establishing trade-supporting infrastructure, and circumventing the effects of emerging trading blocs on a regional basis by gaining insider status.

Indian multinationals draw their ownership advantages from their accumulated production experience, cost-effectiveness of their production processes and other adaptations to imported technologies made with their technological effort, and sometimes with their ability to differentiate products. Since the onset of the latest phase of external liberalisation, the dynamics of the processes of learning, competence building and innovation-making is now getting increasingly grounded in the multinational operations of Indian firms.

However, analyses of the emerging patterns of alliances, acquisitions and collaborations being entered into by the Indian multinationals clearly show that through the FDI-based relationships not many resources could be leveraged by them from the acquisitions and strategic alliances for the upgrading of national processes of technological accumulation.

At large, efforts of Indian multinationals have not yet increased the capabilities of development of new products in a significant way. There exists little encouragement from FDI-based operations for the development of products and systems needed for facing the challenges of socio-technical transitions to be undertaken by the country. The NSI is thus experiencing a liability in the form of distortion in the goals of innovation-making at all levels including public sector research organisations.

Most part of this overseas expansion involves investment in other developing and transition economies, which are the main destinations of Chinese TNCs. The second generation, which emerged after the early s, has diverse ownership structures, including private ownership and foreign participation, and has been presented in competitive manufacturing industries, in particular those related to electronics and information and communication technologies.

The main activities attracting Chinese investments are business activities, trade and natural resources. In recent years, FDI in manufacturing and mining has grown especially fast, accounting for 60 per cent of total Chinese FDI outflows in Because of a lack of core technology, many Chinese firms mainly compete by low value-added products. Most TNCs from South Africa can be categorised into five key categories: mining and energy; transport aviation and road transport ; retail; telecommunications; and financial services.

In the industrial sectors, minerals and energy TNCs dominate, including former State enterprise, Sasol petrochemicals and chemical products , and the many mining giants. Tables 1. From the data presented in these tables, it is interesting to note, first, the significant increase in the number of BRICS TNCs among these top non-EU firms in such a short period.

Also worth noting is that, with the exception of the Brazilian aircraft producer Embraer which ranked th in and th in , all other BRICS TNCs increased their relative position in the overall top rankings. At one extreme, one finds that the only two Russian and sole South African TNCs all belong to the oil and gas sector, which suggests a total dependence on the specialisation in these resource-intensive activities.

At the other extreme is China with its 27 TNCs covering a wide spectrum of activities but with an important emphasis on ICT technologies, particularly telecom equipment — Huawei ranked 39th and ZTE ranked 74th in India showed an expected specialisation in pharmaceuticals, auto and parts, and computer services and software, while Brazil remained with Petrobras in oil and gas, Vale in mining, Embraer in aircraft, a large software firm, and individual positive performance in industrial metals, agricultural implements, electrical energy utilities, and chemicals.

In this final section, conclusions drawn from the analysis of studies undertaken in respect of the experience of BRICS are compared with the results of past investigations undertaken into the impact of policies of FDI promotion that late industrialising countries followed. During the pre-globalisation phase, obligations and restrictions placed by governments in respect of access to market, local content and exports played an important role in persuading foreign investors to contribute to innovation processes, technological transformation and structural change in late industrialising countries.

The absence of FDI as a channel for knowledge transfer is also typical of some other Asian catching-up countries that followed suit after Japan, such as Korea Kim , and Taiwan Aw Although to a lesser extent the importance of this factor is also confirmed by the experience of BRICS countries, the achievements of Indian success in pharmaceuticals and Chinese success in telecommunications and electronics shows that governments of these countries still require a policy space to advance the processes of technological accumulation at home.

However, today, policy regimes in developing countries are certainly characterised by a mix that offers more advantage to TNCs as compared to domestic firms. The analysis made in the different chapters of this book shows that the balance of advantages being offered has varied and is not the same in all emerging economies. Studies reported in this book on the experience of upgrading of the systems of innovation in the BRICS countries during the last two to three decades also confirm that the channel of FDI was not a major international source of knowledge and technology transfer at least for sectors that have ultimately proved to be somewhat dynamic in respect of innovation-making.

There is also confirmation that the upgrading of technology had to be carried out mostly through the investment of domestic enterprises. Investigations into the experience of BRICS countries also point out that the governments had to make their domestic enterprises to submit to a policy of conditional access to foreign sources of knowledge and technology and to bring the required discipline to recipient firms for the development of national absorptive capacity.

This policy regime allows a very different set of policy mixes that give total freedom to foreign investors to establish their operations in the domestic space. Foreign investors are allowed to use the national economic and technological space without being subject to any kind of restrictions and obligations.

While the balance of advantages being offered to the TNCs is certainly not the same in all countries, definitely the new policy mixes offer greater access to the national knowledge base and markets. Today, in many countries foreign subsidiaries receive almost the same treatment as what the domestic enterprises got in earlier times from the policy makers.

Arguably, it has been suggested that changes in the system of governance of the global economy may have influenced the policies of FDI promotion in this new direction. Earlier catching-up paths are believed to be no more open to countries on account of the new regime of trade and development as enshrined in the rules of the World Trade Organization WTO.

Recently, as factor seeking investments originating from the TNCs of US and Europe have moved into knowledge-intensive activities in a big way, this tendency has been consciously allowed to grow in the emerging economies through the new policy mixes of FDI promotion and supportive innovation policy measures.

While only a small amount of OFDI is being undertaken with the aim of tapping the possibilities arising from it due to the reverse flows from host economies to TNCs, it appears that BRICS TNCs have not been able to realise the impact of reverse flows from host locations through even these investments.

For instance, it appears that the finance required for the new start-ups and spin-offs is still not available in most BRICS countries. Private equity PE and venture capital VC firms are not interested to support the processes of innovation-making by such firms. Most tie-ups and investments are directed towards the objectives of taking over production facilities and establishing marketing and distribution networks.

Although the implications of this experience are slowly making an impact on the options of policy makers of BRICS countries, it is also apparent that they are not yet ready to move to a policy regime in which the innovation policy would be used in a non-neutral manner and positively discriminate the measures of innovation policy in favour of indigenous innovation. It seems that the logic of achievement of higher growth rates is still driving the national states of these countries to practice more of the same pathways of greater integration with the emerging global economy.

There is an uncertainty in respect of the path that they should take to grow in the near future. There is also a lack of clarity regarding costs and benefits of taking to the new pathways for growth. Most of them now measure the level of success in competition by the amount of FDI their respective governments are able to attract in respect of knowledge-intensive activities.

In most of the BRICS countries, governments are now in competition to attract FDI for activities such as research and development, design, development and testing, technical support centre, education and training, etc. FDI in sectors designated as high technology is receiving preferential treatment in terms of access to infrastructure, tax incentives and subsidies in these countries.

Governments have become liberal in their approach with regards to encouraging FDI in the sectors connected with IT, software development, biotechnology, pharmaceuticals, and so on. Being aware that TNCs can offer new production facilities, managerial practices and also technology transfer to host countries, it is necessary that in the new context, policy makers must formulate the policy mixes of FDI promotion and innovation policy measures to succeed in the process of building national capabilities.

After the experience of the global financial crisis, certainly there is again a renewal of interest in dealing with the implications of financial liberalisation for the domestic economies in both developed and developing countries. In the emerging economies, policy makers are engaged in rethinking the policies that were responsible for transmission of the impacts of the global crisis into their economies. In this context, the role of private equity and venture capital is also required to be reconstituted keeping in view the specific experiences of transmission of the impacts through the instruments of finance on innovation in the emerging economies.

Solutions to the problem of how the governments must constitute the mix of policies of FDI promotion and innovation policy measures need to be evolved keeping in view that the systems of innovation can have varying mitigation and transformational capacities due to the existence of their systemic connections with the pathways of growth chosen during the last two decades. Since the new measures under implementation also belong to the sphere of innovation policy, in the recent period scholars of innovation have begun to actively study the impact of the policy changes on FDI promotion on the National Systems of Innovation.

In the field of innovation studies, focus is back on the study of contribution of FDI to the processes of technological change and innovation making Fagerberg and Srholec Experience of the implementation of the third generation policies of FDI promotion and innovation-making is clear that the pathways of growth constituted during the period of liberalisation were by themselves certainly insufficient for the introduction of major innovations.

By shaping the institutions and incentives in the same direction for market and non-market actors, the narrowly defined pathways of growth were instrumental in not allowing their processes of competence building and innovation-making to go beyond outsourcing activities and exports to regulated markets in select product segments. Demand-side signals for the activities of innovation of both non-market and market actors were not helpful for the efforts to be undertaken for the benefit of indigenous innovation.

It is apparent that policy coordination would need to appropriately focus on the management of the interplay of global push and domestic pull factors. It cannot be ruled out that in the absence of suitable policy coordination, domestically developed expertise may get used far more for the development of global networks of production and innovation for the benefit of the world market. Alliance building and interactions of domestic and foreign firms need regular monitoring with the aim of not only undertaking programmes and policies to take benefit of the possible realisation of spillover, linkage, competition, and demonstration effects, but also to prevent and minimise the liabilities and distortions being experienced by the systems of innovation in the presence of greater FDI.

FDI cannot play the role of network organiser with the aim of benefitting the processes of competence building and innovations needed by the local productive structures. Policy coordination should take care of the changes to be made with regard to the direction and promotion of foreign direct investment. The government has to determine the goals of development of NSI.

The host government must take responsibility, put the politics in command and undertake the policy coordination. In order to meet the challenge of development of the pathways of growth for undertaking inclusive development, the government can get the relevant domestic actors to initiate and develop innovation-making programmes for the benefit of self-reliant development.

Since the pathways of growth accompanying the new policy of FDI promotion have to bear a significant part of the responsibility for the institutions and capabilities of NSI evolving in a myopic way during the period of liberalisation, foreign subsidiary development cannot be the aim of the third generation policies of FDI promotion and innovation-making.

Specific aims of the government of any latecomer country, in respect of the policy coordination, have to flow from the developmental needs of the people and the upgrading requirements arising out of the need to alleviate the constraints facing the National System of Innovation with regard to the management of technology transitions.

Analysis shows that the domestic market is still the main attraction for foreign firms. Using gross fixed capital formation GFCF as a proxy of investment. Dunning considered three types of advantages related to internationalisation of firms: i Property advantages: assets — intangible or tangible — that confer market power to transnational enterprises; ii Internalisation advantages: capability of firms to add value to its assets, internalising instead of selling them on the market; iii Localisation advantages: related to the institutional aspects, government policies and market structures demanded by transnational firms.

Moreover, there should be locational factors that make its exploration in foreign locations still much more lucrative. However, parent data are included in Nonbank Foreign Affiliates of Nonbank US Parents, that is, enterprises with less than 10 per cent of voting capital. The number of affiliates of the first group corresponds to 92 per cent of the second group, while the relation between sales made by affiliates of first and second groups is 85 per cent Aglietta, M.

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Dosi and J. Stiglitz, Cimoli, G. Oxford: Oxford University Press, 1— Cincera, M. Van Pottelsberghe de la Potterie, Corrado, C. Hulten and D. Sichel, Cambridge: National Bureau of Economic Research. Costa, I. Filippov, Criscuolo, P. Narula, Dicken, P. London: Sage Publications. Dicken P. Forsgren and A.

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Report chevrolet investment tanzania 2004 st peter ording pension and investments

EPS super plan for Foreign Direct Investment in Tamilnadu - FDI - Jobs in TN - makethechanges

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