The Role of MNCs in the Transfer of FMS Technology: Implications for Home and Host Countries

Abstract

This paper is the first part of a project that will examine the role of MNCs in the transfer of FMS technology. The paper is the result of a hypotheses generating phase conducted largely through a literature review. Multinational corporations (MNCs) are the principal agents of international technology transfer in the world today. For Canada, the parent subsidiaries mode of technology transfer is one of the fastest and most effective channels through which new, sophisticated, and expensive technological know-how is imported into the country. Flexible manufacturing systems (FMSs) are a new and innovative approach to manufacturing but relatively slow progress has been made in advancing this outgrowth of technology. Large FMS installations are expensive, require long lead times and debugging times, demand in-house software engineering capability and require detailed planning and commitment at all levels of management. The benefits of FMS are well publicized. The firm specific advantages of MNCs which include the managerial and technical know-how, availability of large pools of funds and the global scanning ability are well suited to satisfy the requirements of large FMS installations. MNCs can play a major role in the transfer of FMS technology to Canada where the benefits of FMSs can alleviate the problems of mid-volume, mid-variety manufacturing faced by the Canadian manufacturing industry. Host countries such as Canada will view FMS favorably in order to improve productivity and develop industrial competitiveness. The establishment of CAD/CAM centers (such as the one in Cambridge, Ontario) is but a very small step in harnessing this innovative technology. Home countries on the other hand are likely to be concerned with the evolution of global competition and the impact on their international competitiveness.

Keywords: Multinational Corporations, Flexible Manufacturing Systems, FMS, Technology Transfer, CAD/CAM, Economies of Scope, Long Lead Times, Canada

JEL Classification: M1, M2, O51, O3, L6, F2