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May 2000 - How much a developing country can take advantage of technology transfer from foreign direct investment depends partly on how well educated and well trained its workforce is, how much it is willing to invest in research and development, and how much protection it offers for intellectual property rights. Saggi surveys the literature on trade and foreign direct investment - especially wholly owned subsidiaries of multinational firms and international joint ventures - as channels for technology transfer. He also discusses licensing and other arm's-length channels of technology transfer. He concludes: How trade encourages growth depends on whether knowledge spillover is national or international. Spillover is more likely to be national for developing countries than for industrial countries; Local policy often makes pure foreign direct investment infeasible, so foreign firms choose licensing or joint ventures. The jury is still out on whether licensing or joint ventures lead to more learning by local firms; Policies designed to attract foreign direct investment are proliferating. Several plant-level studies have failed to find positive spillover from foreign direct investment to firms competing directly with subsidiaries of multinationals. (However, these studies treat foreign direct investment as exogenous and assume spillover to be horizontal - when it may be vertical.) All such studies do find the subsidiaries of multinationals to be more productive than domestic firms, so foreign direct investment does result in host countries using resources more effectively; Absorptive capacity in the host country is essential for getting significant benefits from foreign direct investment. Without adequate human capital or investments in research and development, spillover fails to materialize; A country's policy on protection of intellectual property rights affects the type of industry it attracts. Firms for which such rights are crucial (such as pharmaceutical firms) are unlikely to invest directly in countries where such protections are weak, or will not invest in manufacturing and research and development activities. Policy on intellectual property rights also influences whether technology transfer comes through licensing, joint ventures, or the establishment of wholly owned subsidiaries. This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to study microfoundations of international technology diffusion. The study was funded by the Bank's Research Support Budget under the research project Microfoundations of International Technology Diffusion. The author may be contacted at ksaggi@mail.smu.edu.

Attributes --- Basic --- E-Business --- E-Mail --- Economic Theory and Research --- Emerging Markets --- Foreign Direct Investment --- High Technology --- ICT Policy and Strategies --- Industry --- Information --- Information and Communication Technologies --- International Economics & Trade --- Inventors --- Know-How --- Knowledge Economy --- Labor Policies --- Macroeconomics and Economic Growth --- Microfinance --- New Technologies --- Outsourcing --- Private Sector Development --- Semiconductor --- Semiconductor Industry --- Social Protections and Labor --- Systems --- Technological Change --- Technologies --- Technology --- Technology Industry --- Technology Licensing --- Technology Spillovers --- Technology Transfer --- Trade and Regional Integration

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June 1999 - Empirical analysis of telecommunications reforms in 30 African and Latin American countries yields results largely consistent with conventional wisdom. Competition seems to be the most successful change agent, so granting even temporary monopolies may delay the arrival of better services to consumers. Reformers are correct to emphasize that regulatory reform accompany privatization, as privatization without regulation reform may be costly to consumers. Wallsten explores the effects of privatization, competition, and regulation on telecommunications performance in 30 African and Latin American countries from 1984 through 1997. Competition is associated with tangible benefits in terms of mainline penetration, number of pay phones, connection capacity, and reduced prices. Fixed-effects regressions reveal that competition-measured by mobile operators not owned by the incumbent telecommunications provider-is correlated with increases in the per capita number of mainlines, pay phones, and connection capacity, and with decreases in the price of local calls. Privatizing an incumbent is negatively correlated with mainline penetration and connection capacity. Privatization combined with regulation by an independent regulator, however, is positively correlated with connection capacity and substantially mitigates privatization's negative correlation with mainline penetration. Reformers are right to emphasize a combination of privatization, competition, and regulation. But researchers must explore the permutations of regulation: What type of regulation do countries adopt (price caps versus cost-of-service, for example)? How does the regulatory agency work? What is its annual budget? How many employees does it have? Where do the regulators come from? What sort of training and experience do they have? What enforcement powers does the regulatory agency have? In addition, researchers must deal with endogeneity of privatization, competition, and regulation to deal with issues of causality. This paper-a product of Regulation and Competition Policy, Development Research Group-is part of a larger research effort to analyze the role of competition in telecommunications with special emphasis on Africa. The author may be contacted at wallsten@stanford.edu.

Banks and Banking Reform --- Business --- Business Services --- Data --- E-Business --- Economic Theory and Research --- Education --- Emerging Markets --- ICT Policy and Strategies --- Information and Communication Technologies --- Infrastructure Economics and Finance --- Infrastructure Regulation --- Institutions --- Knowledge Economy --- Knowledge for Development --- Labor Policies --- Macroeconomics and Economic Growth --- Performance --- Price --- Prices --- Private Sector Development --- Public Sector Regulation --- Reliability --- Results --- Social Protections and Labor --- Technology --- Telecom --- Telecommunication --- Telecommunication Reforms --- Telecommunications --- Telephone --- Telephone Connections --- Telephone Service --- Telephones --- User --- Users