Institutions and Internationalisation Strategy

Governments have long recognised that the development and augmentation of indigenous stocks of technology and technological capability is a linchpin of national economic growth. Together with policies directed towards market liberalisation and other economic reform, governmental efforts to enhance a country’s investment climate play an important role in this regard. Today, the multinational enterprise (MNE) is both progenitor and acquirer of new technological advances (in both products and processes) and, by orchestrating a cross-border network of affiliated and alliance-based relationships (e.g. with joint venture partners, research institutions, subcontractors and suppliers), a highly effective exploiter and disseminator of the technologies of others. Thus, increasing the amount and quality of inward foreign direct investment (FDI) usually means that a host country can enjoy greater opportunities for positive spill-overs arising from the investment and commercial activities of investing firms and the new products, processes, tacit know-how and proprietary technology they bring from more advanced countries (Caves 1996). The MNE is an especially potent source of technology inflow for those countries deficient in the requisite financial and natural resources and inventiveness to develop indigenously new technologies or improve existing ones (commonplace among developing and less developed countries).