Host Country Competition, Labour Skills, and Technology Transfer by Multinationals

In Chapter 13, we examined aggregated data on the technology imports of US affiliates in thirty-three host countries, and found some weak support for the hypotheses proposed by Wang and Blomström (1992). Our results showed that the affiliates’ technology imports were positively related to the income level of the host country and (crude proxies for) the competitive pressure in the host economy, but negatively related to the level of distortions and various host country performance requirements. In this chapter, we use more detailed data from a single host country, Mexico, to analyze how the technology imports of foreign firms are related to various industry characteristics. We are particularly interested in the hypotheses that market rivalry and availability of skilled labour may encourage the multinationals to bring more technology to their foreign operations.1