First, to measure the host countries’ technology
transfer and performance requirements, we have
calculated two proxies from US Department of
Commerce (1985), Table II.I.3. The first of these,
labelled TEQS, focuses directly on technology transfer
requirements, and measures the share of US affiliates
in each host country in 1982 that were. reported to
operate under requirements to use the most advanced
technology available, perform R&D locally, have
access to the US parent’s patents, or transfer skills to
local personnel. We hypothesize that these requirements
increase the affiliates’ technology transfer
costs, and we therefore expect TREQS to have a negative
impact on the affiliates’ imports of technology.
The impact may not, however, be very significant, for
several reasons. Although the requirements captured
by TREQS typically increase transfer costs, it is likely
that they are sometimes backed up by strong sanctions,
so that only the firms that actually transfer much
technology are allowed to stay in operation. The
effects of the requirements may sometimes be insignificant
because many of the rules are ambiguous: the
affiliate decides which technologies are viable, there
may not be any direct connection between R&D and
imports of new technology, and access to the parent’s
patents does not ensure actual transfer of technology.
Most importantly, high levels of TREQS may sometimes
be motivated by low imports of technology.