UGF Lecture 6

Management > Global Firm > Kojima > Case A > Case B > Conclusive remarks > Further analysis > Real Case A > Real Case B

Real Case B

Case B derived from the story of FDI by US firms in the 25 years after WWII. This FDI occurred in industries where there was not immediate loss of comparative advantage or exports for US firms. The cause of FDI was trade restraints or as part of the strategic competitive processes in these more concentrated oligopolistic industries.

Thus it may have been a response to some threat to profitability, but definitely not to recuperate any loss of efficiency of production.

Remember that this sort of FDI only pulls up the country a little and as it remains lower in efficiency than the home country, global efficiency is reduced, as the the originating nation is less efficient.

Propriety of technology transfer

Technology transfer can be appropriate or inappropriate. It is good to transfer technology to LCDs which support its economic development. But is it appropriate? MNEs do develop technology, but they are designed for the customers in DCs. It is appropriate in Case A, however, as the industries are likely to transfer technology relevant to the LCDs' needs.

This US FDI was into other developed countries, where it marginally upgraded the local technology. The FDI was disorderly, as the technology was inappropriate to these countries' developmental needs. The US technology was sophisticated, capital-intensive and skill-intensive and thus irrelevant to activating the potential advantages in C2.

Positive and Negative LAs