Under the Radar: Reflections on ‘Forced’ Technology Transfer and the Erosion of Developmental Sovereignty

Abstract

This commentary is directed toward addressing concession by developing country foreign direct investment (FDI) hosts of a potentially important tool for accelerating technological development – a tool that may become more important as the prospects for developmental assistance are otherwise diminishing. Governments at all levels of development have a substantial interest in promoting inward technology transfer in a way that benefits locally-based enterprises. Governments, through legislation and/or regulatory measures, can improve the terms of trade for local businesses by setting ground rules that improve the capacity, i.e. bargaining power, of local enterprises in negotiating the terms of FDI.

Whether technology transfer requirements are ‘optimal’, or a second or third best, this does not argue for taking them out of the toolkit for developing countries. It is difficult to foresee the circumstances that will be relevant for each country and whether particular tools should be employed in particular situations.

Keywords: forced technology transfer, joint venture, development, investment

JEL Classification: F15, F53, K33