Technological integration and global marginalization of Central and East European economies the role of FDI and alliances

1、steep discussion paper no 34technological integration and global marginalisation of central and east european economies: the role of fdi and alliancesslavo radoevicdavid dykerseptember 1996science policy research unitmantell buildinguniversity of sussexbrightoneast sussex bn1 9rftel: +44 (0)1273 686

2、758fax: +44 (0)1273 685865http:/www.sussex.ac.uk/spru slavo radosevic and david dyker 1996四月 2021contentspagesummary1introduction12alliances: transitional or distinctive forms in the cce and fsu countries?53technology transfer through fdi and alliances104from intra-firm to intra-sectoral productivit

3、y145conclusions18references20tables:1:total and per capita fdi in selected countries22:number of fdi projects (flow)23:technology transfer channels before and after 198974:joint ventures in central and eastern europe and the former soviet union85:strategic alliances in information technology, 1984-1

4、994106:the changing competence profile of enterprises in post-socialist economies117:a taxonomy of alliances128:typology of fdi and sourcing factory types159:share of foreign investment enterprises (fies) in the total economy16summarythis paper takes a critical view of the a priori arguments in favo

5、ur of foreign direct investment (fdi) as a factor of economic transition. the key questions are: does a given piece of fdi involve technological integration? and what are the key general conditions of effective technological integration? fdi is in practice only one among a number of possible vehicle

6、s of technological integration - alliances and other non-equity forms of business cooperation may be equally effective vehicles. but no one of them is either a necessary or a sufficient condition of technological integration. lack of empirical research makes it difficult to assess the true content o

7、f the relatively high number of alliances involving transition countries that have been forged in recent years. it seems likely, however, that a considerable proportion of the total number has involved a significant technological content. alliances represent, by definition, voluntary associations of

8、 independent corporate identities. where they have a genuine technological dimension, they should, therefore, reflect a common perception of scope for productivity increases in a way that cannot be assumed for foreign direct investments. that said, it must be recognised that strategic alliances, lik

9、e foreign direct investments, carry within them a very real danger of marginalisation for the less developed of the partner economies.1introductionit is still too early to attempt to give any kind of overall assessment of the impact of foreign direct investment (fdi) on the transition economies of c

10、entral and eastern europe (cee) and the former soviet union (fsu). general levels of fdi into the region have been modest (see tables 1 and 2). perhaps partly for that reason, no clear pattern of correlation between levels of fdi into particular countries and levels of economic performance by countr

11、y has emerged. hungary, in particular, stands out as a country with a relatively very high level of fdi and a rather moderate level of economic performance, while in poland, one of the top-performing transition countries, levels of fdi have only recently started to pick up from relatively low levels

12、 . but there is a clear upward trend in fdi in the region as a whole, and it is striking that in russia, where the perception of medium-term political risk has intensified over the last year or so, fdi doubled between 1994 and 1995 all of this is at least consistent with the a priori case that fdi w

13、ill tend to improve economic performance in the host country, which can be argued on the following grounds:1it will increase the aggregate rate of investment.2it will generate transfers of hard technology.3it will generate transfers of soft managerial technology.4it will tend to induce patterns of n

14、etworking and sub-contracting with other firms in the host country which are conducive to a general increase in levels of technology and productivity.5it will generally help the host economy to integrate into the global economy.table 1total and per capita fdi in selected countriesestimated inflows f

15、or 1995 and estimated stocks end-1995inflowstocktotalper capitatotalper capita$usm$us$usm$usczech r25002425900571hungary4000392127001245poland*2500656800176slovakilovenia150751500754bulgaria1301560071romania31014160070russia160011500034china3550030131500110* data for poland include only

16、 projects with minimum $us1m capitalsource: hunya, 1996a, p4.table 2number of fdi projects (flow)198919901991199219931994czech rhungary - newly founded5642410142864331poland12163151533551574570slovakia23182064slovenia1746164911490485bulgaria81710971021romania1529636812780845713966russia202232527989u

17、kraine40020002800source: hunya, 1996a, p11. for russia and ukraine jermakowicz, 1994, p7.in this paper we take a sceptical view of these a priori propositions. we argue that the effects of fdi, and of the opening-up to trade, on central and eastern europe (cee) and the former soviet union (fsu) are

18、more complex than usually assumed. in particular we question the implicit assumption that post-socialist economies, emerging from an extended period of isolation, will be able, more or less automatically, to engage in technological integration at the global level. by technological integration we und

19、erstand a process whereby the given economies are assimilated into the dynamic learning patterns of international companies. technological integration means that the host economies and their constituent firms are not just passive recipients, but rather active adapters and sources of technological kn

20、owledge. in the opposite case, where countries are technologically marginalised, their constituent firms are not in any significant degree involved in processes of technological accumulation at the international level.what are the conditions for effective technological integration through fdi? first

21、, fdi effects technology transfer to the extent that countries have developed indigenous technological capabilities (itc). the critical factor in the success of particular major pieces of fdi, or the sub-contracting ramifications thereof, is always the domestic environment in the host economy (bell,

22、 1996). chain-reaction technological upgrading consequent on fdi will only occur if domestic firms are prepared to make the effort to raise their game. effective assimilation of major elements of foreign technology is crucially dependent on the existence of congenial market structures in host countr

23、ies. it is for that reason that fdi-led growth is very rare, and that fdi pulled along by indigenously generated growth is much more common.fdi moves into branchesecond, the structure and pattern of fdi inflows are the result of a complex interaction between the corporate strategies of domestic and

24、foreign companies, as moulded through government policies. it is for that reason that it is difficult to explain the huge variations in fdi inflow between the fsu and cee countries, and indeed between individual cee countries, purely on the basis of factor endowment differences. put another way, int

25、ernational firms will undertake far-reaching investments in developing or transition countries only where they believe they can impose their soft management technology comprehensively, so that they can keep control of productivity, and where they believe the local environment will support them in th

26、at task. if these conditions are not met, there will simply be no basis for the kind of fdi that can produce technological integration.third, technological integration can only take place if the general pattern of globalisation reaches beyond a certain critical level. standard liberalisation package

27、s tend to integrate transition economies very strongly at the level of shallow integration (trade and finance), but do not necessarily integrate them at the level of production networks, let alone at that of technological networks (deep integration). in practice, there can be no technological integr

28、ation without deep integration at the level of production networks.there is every reason, therefore, to be sceptical of any assertion that fdi is a sufficient condition of technological integration. there is, furthermore, plenty of evidence to suggest that fdi is not even a necessary condition of su

29、ch integration. effective technological integration of software firms in transition countries, for instance, has been successfully implemented through forms of cooperation with international firms that do not involve fdi as such (dyker, 1996). there is, indeed, a whole gamut of (sometimes overlappin

30、g) forms of international business cooperation, running from classic fdi through sub-contracting to strategic alliances, all of which may - or may not - provide the necessary conditions for technological integration. in this paper we concentrate on two of these - fdi as such, and alliances. specific

31、ally, we pose three questionsare alliances in cee countries only a transitional form towards fdi, or are they essentially different from fdi? what technological capabilities are transferred through fdi and alliances? in what ways can fdi and alliances integrate - or marginalise - cee economies vis-v

32、is the global economy? more specifically, how can intra-firm productivity improvements be transformed into intra-sectoral productivity improvements?before proceeding, it is necessary to clarify the notions of fdi and strategic alliances as used in the paper, viz.-fdi is defined in terms of those inv

33、estments which are made with a view to acquiring a lasting interest in a foreign enterprise, and of having an effective voice in its management. in the case of the cee and fsu countries, it is important to distinguish between greenfield fdi, on the one hand, and indirect acquisitions (joint-ventures

34、) and direct acquisitions (majority stakes through privatisation) on the other.alliances or collaborative agreements are defined in terms of the establishment of common interests between independent industrial partners (i. e. partners not connected through majority share holding) (hagedoorn, 1990).

35、2alliances: transitional or distinctive forms in the cee and fsu countries?while international production (in the sense of intra-firm trade) is currently stagnating in relative terms (not, of course, in absolute terms), there is a growing trend towards sourcing through sub-contracting, joint venture

36、s and alliances, as organisational forms for co-ordinating production internationally (see radoevic, 1996a.). as fdi expands, so too does a whole range of different types of purchasing agreements. this tendency forms part of a shift in the direction of externalisation of markets for intermediate pro

37、ducts, and towards new organisational modes of international sourcing. one indicator of the process is the increasing importance of sub-contracting (which will not be discussed here) and strategic alliances. both developments reflect a trend towards non-equity based trade and linking, going beyond t

38、he purely arms length level, in east-west trade. are minority ownership and non-equity forms of co-operation only transitory forms towards the acquisition of full control, or are they distinct forms where considerations other than outright control are predominant? in the case of the developed countr

39、ies, both empirical research (see hagedoorn and sadowski, 1996) and theoretical inquiry (chesnais, 1996) suggests that strategic technology alliances are not a transitional forms towards mergers and acquisitions, but rather represent a distinct category. alliances as distinctive organisational forms

40、 may be based on what chesnais (1996) calls relational economies - economies that cannot be achieved within a single company, but only within semi-integrated or network relationships.in the case of the cee and fsu countries, however, no testing has yet been done on any such hypothesis on the true na

41、ture of alliances. lack of a systematic data base, sub-critical numbers of observations and still relatively short time series, are obvious problems for econometric testing. our provisional hypothesis is that both aspects - alliances as transitional forms towards mergers and acquisitions and allianc

42、es as a distinctive form - may be present in this particular case. in order further to clarify that proposition, it is necessary first to look back at the different forms of technology transfer that may be operational in cee and fsu countries, and the factors which have conditioned them.diversificat

43、ion of technology transfer formsthe opening-up of previously closed economies clearly changes the patterns and modes whereby these economies are integrated into the global economy. in the past, the cmea countries were linked into the world economy predominantly through trade, with the import of equi

44、pment and licences serving as the main vehicle of technology transfer. now the whole gamut of mechanisms available to the open economy is at their disposal. simple trade, fdi, and the various forms of minority equity or non-equity type of relationship, are all now possible as vehicles for technology

45、 transfer.table 3technology transfer channels before and after 1989before 1989after 1989import of equipmentfdilicencesalliances (incl. joint ventures)joint ventures (only from 1988)import of equipmentsubcontractinglicencesthree phases can be discerned regarding the relationship between fdi and allia

46、nces within this general context: 1before and at the early stage of transition foreign investors concentrated on joint ventures (jvs) with state-owned enterprises (soes), within which they had minority positions. until 1990 the dominance of jvs was overwhelming. this was simply because in many cases

47、 jvs were the only permissible form. it is estimated that over the period 1988-1990 the number of jvs in cmea countries rose from 383 to over 10,000 (see table 4). in practice, this was very much a transitional phase, and many of these jvs were transformed into direct investments after 1989.2in the

48、current, second, phase, fdi is the preferred mode of entry. from 1990 the importance of fdi grows sharply in all post-socialist countries. but while minority shareholdings (joint ventures, minority acquisitions) have diminished in importance, they still make up a significant proportion of total fore

49、ign business involvement in the cee countries, and indeed still dominate in russia. the hungarian pattern is, perhaps, typical. in that country, in 1990, 62% of fdi capital was placed in minority-owned foreign investment table 4joint ventures in central and eastern europe and the former soviet union

50、population01-jan01-jan01-jan01-mar01-jul31-dec1988 (m)198819891990199019901990soviet union286231911261148017342800hungary111022701000100016005000+poland381355918100015502400czechoslovakia16716606060n/abulgaria91525303030n/aromania2355555n/atotal383165562327435754979over 10,000source: dunning, john (

51、1991): the prospects for foreign direct investment in eastern europe, discussion papers in international investment and business studies, no 155, university of reading, august.enterprises (fies). by 1991, however, only 34% of cumulative total foreign capital was placed in minority companies, and by

52、1993 only 25.5% (hunya, 1996b). in russia the share of joint-ventures in the total number of fies decreased from 95.7% in 1992 to 55.4% in 1995 (astapovich et al, 1995). it is only in the telecoms sector that foreign minority shares are still the rule, as a function of the enormous volumes of invest

53、ment involved and, in some cases, the political complications surrounding a basic infrastructural element. even here, however, the situation may change significantly, indeed is already changing in some countries. in hungary, for example, foreign partners which initially controlled just 27% of matav,

54、 the national telecoms company, obtained majority control in 1995.in general, the data indicate a decrease in the importance of joint ventures as a form of foreign involvement, on account of general liberalisation which allows for direct acquisitions, greenfield investment with 100% foreign ownershi

55、p, and other, more advanced, forms of inter-corporate co-operation.3in the coming, third phase, further increases in the weight of non-equity forms and minority shareholdings are to be expected, as the transition economies recover and start to grow steadily, and as domestic firms start to go global.

56、 an exclusively fdi-based scenario is, therefore, unlikely. world-wide experience indicates that when the process of catching-up is accompanied by fdi, direct investments are usually complemented by strategic alliances, including technological alliances. certainly, technological alliances are less i

57、n evidence among developing countries (see hagedoorn and freeman, 1994). even here, however, there is evidence of an upward trend in the most recent period (see vonortas and safioles, 1996). among the developing countries it is the group of highly dynamic asian economies like hong kong, taiwan, south korea and malaysia that show the biggest concentrations of alliances. this suggests that technological alliances as a distinctive form of inter-com