Technology, Market Characteristics and Spillovers

There are numerous case studies to suggest that technology spillovers from foreign direct investment may provide important benefits for the host countries of multinational corporations (MNCs) (see Chapter 8). The technology and productivity of local firms may improve as foreign firms enter the market and demonstrate new technologies, provide technical assistance to their local suppliers and customers, and train workers and managers who may later be employed by local firms. The competitive pressure exerted by the foreign affiliates may also force the local firms to operate more efficiently and introduce new technologies earlier than would otherwise have been the case.