The crucial role played by the technological progress in the economic growth is now widely accepted (Romer, 1994). Technology can stimulate economic development and industrialization. It can take two forms, both of which are valuable.
Technology can be incorporated in a production process (e.g., the technology for discovering, extracting and refining oil) or it can be incorporated in a product (e.g., personal computers) (Hill, 2000). However, many countries lack the research and development resources and skills required to develop their own native product and process technology.
This is particularly true of the worlds less developed nations. Evidence provides that the vast majority of economic studies dealing with the relationship between FDI on the one hand and productivity and/or economic growth on the other hand, have found that technology transfer via FDI has contributed positively to productivity and economic growth in host countries (OECD, 1991). Technologies that are transferred to developing countries in connection with foreign direct investment tend to be more modern, and environmentally ‘cleaner’, than what is locally available. Moreover, positive externalities have been observed where local imitation, employment turnover and supply-chain requirements led to more general environmental improvements in the host economy.
The crucial role played by the technological progress in the economic growth is now widely accepted (Romer, 1994). Technology can stimulate economic development and industrialization. It can take two forms, both of which are valuable. Technology can be incorporated in a production process (e.g., the technology for discovering, extracting and refining oil) or it can be incorporated in a product (e.g., personal computers) (Hill, 2000). However, many countries lack the research and development resources and skills required to develop their own native product and process technology. This is particularly true of the worlds less developed nations. Evidence provides that the vast majority of economic studies dealing with the relationship between FDI on the one hand and productivity and/or economic growth on the other hand, have found that technology transfer via FDI has contributed positively to productivity and economic growth in host countries (OECD, 1991). Technologies that are transferred to developing countries in connection with foreign direct investment tend to be more modern, and environmentally ‘cleaner’, than what is locally available. Moreover, positive externalities have been observed where local imitation, employment turnover and supply-chain requirements led to more general environmental improvements in the host economy.
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