Evaluate the Role of Transnational Corporations in Transfer of Technology to Developing Countries.

Transnational Corporations (TNCs) act as vehicles for transfer of technology. The developing economies are technologically backward and lack sufficient resources to carry on research and development. From this point of view, TNCs have offered a great boon. TNCs have served as agents for the transfer of superior technology. TNCs have provided advanced technological know-how, improved ‘skills and consultancy to the host countries.

A large proportion of research and development expenditure that forms the basis of technology development in today’s world of all global civilian research and development is concentrated within the TNC system comprising a component of 75- 80 per cent.

An important mode of transfer of technology is trade in capital goods. Many developing countries of the world have imported technology as import of capital goods. The share of TNCs in capital goods import’s of developing countries is very substantial, but the most important mode of transfer of technology by TNCs has been foreign direct investment i.e. transfer of technology along with equity participation.

A TNC undertakes FDI when it possesses certain technological advantage over its competitors. We know that technology is one of the principal drivers of the competitive advantages of a TNC. In order to take advantage of technological expertise, TNCs manufacture goods directly in the foreign market. The direct involvement in foreign markets brings the company closer to increasing technological developments. TNCs are prepared to respond by acquiring new technology.

Thus Transnational Corporations (TNCs) are able to protect their international competitiveness. TNCs generally transfer their most recent technology to their affiliates.

Hence, foreign direct investment is considereed to be the most effective means for developing countries to gain access to latest technology. TNCs facilitate transfer of technology to developing countries by introducing new products or qualitatively superior old products in the developing countries. TNCs transfer technology through training or employment of technical expert. TNCs import the requisite training to personnel of host country in new skills and introduction of new management methods.

Yes there is difference between the transfer of technology by the Transnational Corporations (TNCs) to an enterprise in developing countries from that of small and medium sized companies.

TNCs own 75-80 per cent of technology handled in the market. TNCs have established research and development units of significance either in home country-or in developed countries. Whatever research and development units are found in developing countries, these are confined to adopting the technology of parent company to local conditions.