The differences between developed and developing
countries, in particular for payments of royalties
and license fees, are also strikingly large, as noted
above. Differences in industry distribution explain
part of this, but there may be other factors that depress
the technology flows to developing countries. These
include the weaker learning capability of developing
countries, weak infrastructure, fragmented markets,
political instability, and a host of other matters for
which we have no comprehensive data. For some of
the tests, we have therefore recalculated the dependent
variables with separate expectations for developed
and developing countries - in other words, the
measures for expected license payments from developing
countries have been based on average license
payments from developing countries only. The resulting
variables, which are corrected both for the industry
distribution and development status, are termed
LICDEV and CAPDEV, and allow us to concentrate
more directly on the effects of the host country
characteristics we have data for. All of the measures
have been scaled in two ways, i.e. divided by the
affiliates’ sales and by their employment, to provide
several alternative proxies for technological effort.
The six versions of the dependent variable are summarized
in Appendix, Table A 1 .4