A critical analysis of foreign direct investment as a vehicle for technology transfer to developing countries: A case study of Zambia

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Gondwe, Alick
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This essay surveys the issues raised by technology transfer to developing countries through Foreign Direct Investment. The argument for foreign investment as a vehicle for technology transfer is the dual role that the investment plays. Apart from providing capital for investment which is in short supply in developing countries, the investment brings with it the know-how necessary for the success of the investment. Particularly, it is noted that multinational firms are well suited for this role because of their ready resources, easy mobility, abundant trained personnel and wide experience derived from the many countries in which they do business. Technology is a vital part of the development process, a necessary input into all activity. Because of the historical domination of research and development by developed countries, a very large part of the technology used is transferred from developed to developing countries. The transfer raises four major issues: those of the cost of the transfer, the appropriateness of products and techniques which are transferred, the effects of the transfer on learning and technological development in LDCs, and the effects on independence. This essay considers the consequences of the transfer and the range of policies that might be adopted, nationally and internationally, in relation to each of these issues. It is argued that the appropriate policies will vary according to the stage of development of each country, its technological capacity and its own objectives. However, in general it is concluded that an active technology policy is called for if the costs associated with technology transfer are to be reduced and the benefits increased. While it is easy to design suitable policies on paper, it is much more difficult to ensure that they are effective in practice. It is in this light that this essay endeavours to offer a critical analysis of Foreign Direct Investment as a vehicle for technology transfer to developing countries with particular emphasis on Zambia.
Investment-Zambia , Technology Transfer-Zambia