Foreign direct investment and technology transfer in China : a case study of automobiles and elevators (1979-1990).
The present study examines both the impact of foreign
direct investment, mainly in the form of MNCs, on
technological capability 1) within their affiliates
(including joint venture), and 2) of related firms in the
same chain of production (with a focus on backward
linkages via subcontracting), and the learning progress
of locals under the existing economic policy in China.
Using the automotive and elevator sectors as samples, the
study investigates the choice of contractual arrangements
for technology transfer by the MNCs, Volkswagen AG(VWAG)
and Schindler Elevator(SE); the transfer of technical and
non-technical skills from MNCs to locals under such
arrangement; the creation of backward linkages between
their affiliates and domestic firms; and the constraints
on technological effort of these firms.
The study finds, on the basis of empirical studies in
China, that the compromised arrangement --- joint venture
chosen by VWAG and SE as the 'first best' strategy
provides a business framework for technology transfer.
Gaining access to the technologies of product and
production from MNCs under such business framework is
significant for filling the gap between existing
technologies in old plants and technologies in the 1980s.
Moreover, the study finds that backward linkages by MNCs
can be important to the host country for increasing local
production and upgrading local industrial capacity.
The study also finds that the failures of technological
effort in China can be traced directly or indirectly to
economic policies. It appears that the same set of
policies has resulted in some of its achievements.
However, it is likely that these failures would have been
less weighty, if a different set of policies had been
adopted in a properly balanced way.