A lth o u g h th e previous section d e m o n stra te s th a t s ig n ific a n t differences e x is t be
tween th e effects o f F D I a nd d o m e s tic in ve stm e n t as w ell as between F D I fro m d if
ferent source co un trie s, closer e x a m in a tio n is needed to uncover th e p a tte rn o f these
differences. Because th e lite ra tu re p o in ts to g ro w th th ro u g h F D I as a “ c o n d u it fo r
tra n s fe rrin g advanced te ch n o lo g y” (L im 2001) it is in the area o f te ch n o lo g y tra n s fe r
th a t I focus th e analysis.
M ost econom ists are b y now in agreem ent w ith F in d la y ’s (1978a) sta te m e n t th a t
“ th e c re a tio n and d iffu s io n o f new te c h n o lo g y is u n d o u b te d ly th e m a jo r d e te rm in a te
o f econom ic g ro w th .” (p. 1) Ik 's p ite th is a g n e m e n t debates c o n c e rn in g the- n a tu re
o f th is te c h n o lo g y and its m echanism o f tra n s fe r rem ain u n se ttle d . I f tech n o lo g y is
a pure p u b lic good th a t is m a g ic a lly flo a tin g a ro u n d in space fo r th e ta k in g , as it is
in th e neoclassical mcxlels o f Solow (1956) and Swan (1956), th e n in th e long ru n ,
g ro w th ra tes o f o u tp u t in a ll econom ies sh ou ld be equal to one anothcT at the ra te o f
w o rld w id e te ch n o lo g ica l progress. E m p iric a l s u p p o rt fo r th is h ypo the sis, except w hen
lim it in g th e sam ple to d e v e lo jx x l c o u n trie s, has not l>een found.
T h e endogenous g ro w th th e o ry g re w o u t o f th is d is s a tis fa c tio n in w h ic h econom ic
g ro w th was d e te rm in e d b y facto rs o u ts id e th e m odel. As th e nam e im p lie s , g ro w th
in th is g ro u p o f m odels was th e re s u lt o f te ch n o lo g y a n d /o r kn ow ledge sp illo ve rs th a t
were th e re s u lt o f e ith e r u n in te n tio n a l (R o m e r, 1986) o r in te n tio n a l (R o m e r 1987,
m odels are an im provem ent o ve r th e neoclassical m odels described above, one m ust
assume th a t technology is n a tio n a l ra th e r th a n in te rn a tio n a l in scope in ord er fo r
th e ir im p lic a tio n s to m atch an e m p iric a l re co rd th a t provides evidence o f persistent
a nd g ro w in g differences between th e ric h a n d p o o r co u n trie s o f th e w o rld 20.
Jaffe, T ra jte n b e rg , and H enderson (1993) show th ro u g h th e use o f p a te n t d a ta th a t
kn ow led g e spillovers ten d to o c c u r n o t o n ly a t th e c o u n try level b u t more* sp e cifically
a t th e s ta te and S M S A level a nd spread s lo w ly over tim e . H owever, it is hard to
conceive th a t in a w o rld th a t is l>ccom ing m ore in te g ra te d e veryda y th a t mechanisms
are n o t in place? to help in the? spread o f th is knowle-dge:. The? me?chanisrns to w hich I am
re fe rrin g are? inte?rnational trade? o f gcxxls, se?rvice?s, and fac to rs a n d the? m u ltin a tio n a l
c o rp o ra tio n . F in d la y implie?s th a t “ c o n ta g io n ” me?chanisms have: been in place? for the:
lx? tte r p a rt o f mode*rn h is to ry and descrilie s the* mode?rn e?volution:
While? the: m ig ra tio n o f in d iv id u a ls , such as D u tc h s h ip w ig h ts to Swe- de?n o r Ita lia n archite*cts to Russia, was the? chie?f fo rm o f te?chnological d iffu s io n by “ co n ta g io n ” in e?arlier time?s, the?ir role* is now taken ove*r by la rg e o rg a n iza tio n s such as th e m u ltin a tio n a l corp orat ions. T h is devel o p m e n t runs p a ra lle l to th e replacem ent o f the? p ic tu re o f the? s o lita ry' in v e n to r o r in n o v a to r h im s e lf, as p a in te d so lo v in g ly by Schumpete?r for instance, by th a t o f the? ro u tin iz a tio n o f th is proce?ss in the: w o rk o f large? team s in the R & D d e p a rtm e n ts o f the?se same? c o rj)o ra tio n s . The? "c a rr ie r” o f th e v iru s o f new te?chnology is n o t th e foreign in d iv id u a l but the: fore*ign c o rp o ra tio n . (F in d la y 1978b p.4)
G iv e n th a t there is m ost c e rta in ly now , and p ro b a b ly have been, a m p le “ ca rrie rs”
o f te c h n o lo g y across e?conomic b o rde rs, I agree w ith th e a ssum ptio n th a t knowledge
20See Fagerberg (1991) for a discussion of th e role o f technology in the determ ination of interna tional differences in growth rates.
a n d technology are indeed p u b lic goods. I f th is is tru e how ever, th e re m ust be an
im p e d im e n t to th e tra n s fe r o f technology. Essay one as w e ll as B oren sztein, DeG rego-
rio , a n d Lee (1998), a n d X u (2000) p ro v id e evidence th a t a s u ffic ie n t level o f hum an
c a p ita l is needed to a b s o rb te c h n o lo g y — th is is no d o u b t one fa c to r. B u t are there
m ore? B a rro and S a la -I-M a rtin (1999 ch a p te r 12) p ro v id e a lis t o f e x p la n a to ry v a ri
ables w h ich have been used in cross-co u ntry g ro w th e q u a tio n s b y various a uthors.
A lo n g w ith various m easurem ents o f e d u ca tio n and hum an c a p ita l th e y lis t t a r if f
rates, measures o f p o litic a l ris k and p o litic a l in s ta b ility , g o ve rn m e n t e x p ;n d itu re s (as
w e ll as separate measures fo r w a r a nd deifense e x p e n d itu re s ), in ve stm en t rates, and
fin a n c ia l de:ve;lopme;nt measures. W h a t do these> measures have* in com m on? I ’ pon firs t glance it w ould see;m th a t th e y a ll represent a cost o r l>e;ne;fit o f d o in g business
in a crountry. A n edu ca te d workforce; is more; productive-. T a riffs make' it more- e x p u l
sive to o b ta in forengn in p u ts . A n u nstable p o litic a l s tru c tu re ' increases the* expe'cte;d
cost o f d o in g business in a p a rtic u la r co un try. G overn m eat e x p m d itu re s , i f speat on
in fra s tru c tu re ; w ill bene:fit commence. H ig h in ve stm en t ra te s art; a sign o f a g ro w in g
prosperous economy. A we;ll-dc;ve;loped fin a n c ia l marke;t decreases th e cost o f c a p ita l.
In term s o f th e costs and benefits associate*! w ith a d o p tin g a p a rtic u la r tech
n olog y consider th e fo llo w in g fro m B aum ol:
E ver since th e b e g in n in g o f th e In d u s tria l R e v o lu tio n a n d u n d o u b te d ly e a rlie r, there has e x is te d a g ro u p o f in n o v a tiv e e n tre p re n e u rs w h o have fo u n d it p ro fita b le t o use th e ir ta le n ts fo r th e in n o v a tiv e d is s e m in a tio n o f technology. A s Joseph S chum peter im p lies, fin d in g a new place in w hich to use an in v e n tio n is its e lf an in n o v a tiv e act, a n d fre q u e n tly th e re s u ltin g tra n s fe r m ust be a ccom panied by p ro d u c t o r process in n o v a tio n , as whe;n
it is a d a p te d to a d iffe re n t c lim a te o r to a n ew m a rk e t w ith its p a r tic u la r consum er tastes, and so on. (B a u m o l 1994 p .76)
Such a s ta te m e n t im p lies th a t th e re is a c c e t associated w ith a d a p tin g a p a rtic u la r
te c h n o lo g y to a d iffe re n t s itu a tio n .
F \irth e r evidence comes fro m a th e o re tic a l paper b y Brezis, K ru g m a n , and
T s id d o n (1993) w h o p ro vide a tw o -c o u n try m o d e l in w h ic h a new te ch n o lo g y is freely
a v a ila b le to b o th co un trie s, yet because o f th e c u rre n t econom ic c o n d itio n s th a t exist
in each, o n ly one c o u n try fin d s it p ro fita b le to a d o p t th e technology.