Internalization

Firms are increasingly vigilant about looking for mechanisms to protect their technology. When technologies are deployed on a global scale, government authorities in developing countries are challenged to enforce IP regulations because of reduced funds, substantial reductions in governmental control, the inability of governments to keep pace when innovation is rapid and significant or when technology obsolescence is fast (Lall, 1992; Maskus, 1998; Sporleder and Goldsmith, 2001). The decline in the importance of contractual or non-equity modes of technology transfer is worth noting (Kumar, 199 7). Internalized forms of technology transfer (i.e. intra-firm) have become preferred by technology-holders (Vishwasrao, 1994).

Drawing on a study of collaboration agreements between British and Indian firms, Davies (1977) concluded that difficulties in securing IPRs serve as powerful barriers to information trades between developed and developing economies. In another study, drawn upon a sample of 102 technology licences provided by US firms, it was inferred that returns to a technology supplier increase with patent protection in the recipient nation (Contractor, 1980). It was further concluded that the technologies transferred to developing countries tend to be significantly older than those transferred to industrialized

Table 2.8. Weak intellectual property protection (IPP) effects on national investment (1991). (From Mansfield, 1994.)

Transport Electrical Food Country Chemicals equipment equipment products Metal Machinery Average

Panel A: Joint ventures with local partners

Argentina

40

0

29

12

0

27

18

Brazil

47

40

31

12

0

65

32

India

80

40

39

38

20

48

44

Indonesia

50

40

29

25

0

25

28

Mexico

47

20

30

25

0

17

22

Korea

33

20

21

12

25

26

23

Thailand

43

80

32

12

0

20

31

Average

49

34

30

19

6

33

Panel B: Transfer of newest or most effective technology to wholly owned subsidiaries

Argentina

44

20

21

12

0

14

18

Brazil

50

40

24

12

0

39

28

India

81

40

38

38

20

41

43

Indonesia

40

20

31

25

0

23

23

Mexico

31

20

21

25

0

22

20

Korea

31

20

28

12

40

22

26

Thailand

60

80

31

12

0

18

20

Average

48

34

28

19

9

26

Panel C: Licensing of newest or most

effective technology to unrelated

firms

Argentina

62

0

26

12

0

29

22

Brazil

69

40

29

25

0

73

39

India

81

40

38

38

20

50

44

Indonesia

73

20

33

25

0

37

31

Mexico

56

20

28

25

0

36

28

Korea

38

20

34

12

40

29

29

Thailand

73

80

36

12

0

25

38

Average

65

31

32

21

9

40

Average over the seven countries listed.

Average over the seven countries listed.

economies. This is because of the reduced incentives for licensees in developing countries (Rockett, 1990). India reflects such a state where 80% of the chemical firms surveyed indicated that they would not engage in joint ventures or transfer new technologies to subsidiaries or unrelated firms due to weak protection (Table 2.8).

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