Key of success: combination of Home-grown Innovation and ForeignTechnology in the Growth of EMNEs.Abstract: In this article, we examinetheoretical and experiential understanding about need of foreign technology andindigenous innovation discipline post the publication of Xiaolan Fu, Carlo Pietrobelli,and Luc Soete, (2011). In their paper, Fu et al.
(2011) provides usefulinformation about these two factors. Although they give enough information butin our perspective we will explain why these two factors are very important inthe growth of any EMNEs in this competitive era, and we will find what mainaspects are which makes these factors very crucial. In addition of this we willfind other factors without these two can plays imperative role in the growth ofEMNEs. We are going to advance beyond rethinking about their article and try toexplain more. Keywords: indigenous innovation, foreign technology, total qualitymanagement, Introduction:”The Role of Foreign Technology andIndigenous Innovation in the Emerging Economies: Technological Change andCatching-up” (Xiaolan Fu, Carlo Pietrobelli, and Luc Soete, 2011) is one of themost significant publications in international business and emerging economics.
They has been cited 299 articles to make this publication according to googlescholar. In their article, they explain how foreign technology and indigenousinnovation plays important role in set up of a firm in emerging markets andthey explain this factors by evidence of annual growth in GDP of the emergingcountries. Fu et al. mention that rise in the emerging economies has changedthe scenario of world economy, in 2007, the annual GDP of china was 13%, theannual GDP of India was 9.1%, and the annual GDP of Brazil was 5.4% at thattime (Fu et al., 2011). The title of the article hints thathow EMNEs are growing day by day and what are main reasons behind it.
In the 3rd point of the articleexplain how foreign technology is spreading day by day and how developingcountries are adopting these technologies from developed countries. To extendit further Fu et al. (2011) explains that foreign direct investment is firstways of spreading technology, imports technology from abroad by developingcountries and EMNEs is second way of technology diffusion. Furthermoreinternationalization of research and technology and technology transfer,integration in global value chain and technology transfer are other methodswhich helps to transfer exclusive technology from one firm to other or onecountry to other country. In the article, further they explains why indigenousinnovation is important along with technology and explained deeply mainbenefits of indigenous innovations and how this factor relates to catching upforeign technology. In the second last segment, they tried to answer thequestion of is foreign technology and indigenous innovation complements orsubstitutes? And after that makes final conclude about their article.
Contributions of Xiaolan Fu, Carlo Pietrobelli, and Luc Soete:For us, Fu et al. (2011) signifiesa great result regarding to use of foreign technology along with this alsotried to explain homemade innovations which makes EMNEs successful incompetitive era. Rather than dive into that debatedirectly, our approach was: (1) to understand at where and how Fu et al. (2011)was utilized in the theoretical publication space; (2) to utilize this analysisas a basis for raising a list of queries as to whether or not we have acquiredas far as we can with present concept and approaches and ask if it was,perhaps, an appropriate stage to move onto a different way of thinking aboutthis important aspects, (3) to discourse whether those publications representany material advancement and, if so, how so. Our first step was to search at allthe articles that were cited by Fu et al. (2011) which were obtained fromdifferent websites, and we tried to read those articles with more deeplyunderstanding for finding some other factors which can plays significant rolein growth of EMNEs especially in the emerging markets. We found 299 articles which werecited by Fu et al. (2011) are available on sciencedirect.
uk, aau.dk and so on. We categorized these articles utilized theforeign technology in different markets and different countries. List of articles: Name of countries Can Environmental Regulations Drive Firms Innovation? Evidence from Two Policies in China (Liqun et al., 2015) China Regional Innovation, Inward FDI and Industrial Structure: A Provincial and Firm Level Study of China, Economic impact analysis of the science and technology investment’s contribution to the regional GDPs in the northern central cities of Anhui province, China (Li j, 2015) China The effect of internal and external factors on innovative behavior of Chinese manufacturing firms, and so on China Knowledge flows and networks in the ICT sector: the case of Pakistan (Qazi AB, 2015) Pakistan Knowledge flows and networks in the ICT sector: the case of Pakistan (Qazi AB, 2015) Pakistan Foreign direct investment in European transition economies-The role of regulations, corruption and cooperation (Dabic et al.,2015) Europe Regional conditions and innovation in Russia: the impact of foreign direct investment and absorptive capacity (Smith et al., 2017) Russia Exploring Foreign Direct Investment and Technology and Knowledge Transfer Issues in Africa (Osabutey E.
, 2013) South Africa Financing of Innovative Small and Medium-Sized Enterprises. A Research in Turkey (Ayranci et al.,2016) Turkey Regional Pathways to Technological Upgrading: The Impact of Agglomeration Economies and its Regional Covariates on Upgrading in Post-reforms India’s (Mallavarapu. B., 2013) India DYNAMICS OF INDUSTRIAL PRODUCTION IN BRICS COUNTRIES (kutu et al.,2016) BRICS Table 1. Articles citing Fu et al. (2011) on different countries We mention just only main articleswhich relates to these countries rather than mention all of these, this tableexplains that Fu et al.
consider all BRICS countries and all pay attentiontowards some European countries too to make this article. It indicates thatthey searched a lots and tried to what was the effect of adopting foreigntechnology in these emerging markets. Toexplain their point of views, they insert a graph in their articles and I willexplain it more deeply. They mention that India started using latest from theyear 1980 and the annual GDP growth was on increasing trend, China, SouthAfrica, Brazil were started utilization of foreign technologies fromrespectively in the year of 1979, 1980, 1964. On the other hand, japan andother developed countries which had exclusive technology since 1960 and that’swhy they dominated the world economy. We can see in history that British wentto India and other countries for taking advantages of rich quality rawmaterial, cheap labor costs and all this only became true due to having besttechnology at that time too. Technology made them able to take advantages from rawotherwise if we see the distance between both countries it look impossible. On the second aspect they mentionindigenous innovation which escalate the overall growth of any EMNEs.
We allalso agree with this factor because if any country has no indigenous innovationthen there is no value of foreign technology, so these both factors interconnect with each other. We can see that if any emerging country is goingforward behind this there is great contribute of local brains, local skills,and innovating techniques. A perfect example of this statement is India, now adays India is country which is famous for its well skilled and highly qualifiedwork force especially in software developing like Infosys, Mastek, 3i InfoTech,Wipro, OpenXCell and so on.
Furthermore, Fu et al. (2011)mention that China, India, and many other they sent their students in abroadfor further study and learn some valuable skills and then introduced differentpolicies so that they can return their home countries, and can share theirlearning with their home people and firms. By doing this, they increased theirstandard of handling latest technology, and searching new methods andproduction techniques so that they can make VRIN products and can dominateemerging markets as much as they can. These BRICS countries are spending onResearch and development factor because they know better what the need oftoday’s world is and how to be number one in the world. In these countries haveexponentially increased their expenditure on research and development sector.Fu et al. (2011) states that China’s total expenditure on R was greaterthan France, Germany, and it was about 3rd of total as whole EuropeanUnion’s expenditure on R&D.
Foreign direct investment is bigand important factor which enhance the level of indigenous innovation in thesecountries too. Eden et al. (1997) mentions in their article that technologytransfer due to foreign direct investment has given positive and effectiveresults for FDI hosting countries. Whenever the FDI hosting countries laborwork with new techniques and latest technology then they learn how to handlethese technology and they become more skilled which are competitive advantagesfor country. Rethinking: other factors rather than Foreign Technology and Indigenous Innovationwhich are essential in growth of Emerging Economics.The foreign technology plays important role in the growth ofall emerging markets as a proof of this statement the annual GDP has beenincreased dramatically in emerging countries, the annual growth in GDP in Chinawas from 5% to 41% and in India it has increased from 14% to 83%. (Fu et al.
,2011). It explains that innovative technology not only vital for expansion ofbusiness but also crucial for to compete market competitors and to stay in themarket for long term. Frank et al. (2016) determine that their main fourefforts of innovation which are investment in human resources andorganizational culture, investment in technology, investment in social capital,investment in market oriented activities. These factors explain that how firmsspend their money for being king of the market.
The international firms specialin emerging markets they always try to hire highly skilled work force and tryto create such kind of environment which can produce overall profit in terms ofproduction as well as total quality management. Second efforts that is investment in technology refers that EMNEs spendlots of money in R&D activities, technology exchanges, and purchase latestand sophisticated machinery for making VRIN (Valuable, Rare, ImperfectlyImitable and Non-substitutable) products for holding market shares. Thirdfactor, investment in social capital explains that participating in in R&D,maintaining relation with customers, research institutions, and othercompetitors so that firms can update their information regarding current trendsand market positions. Fourth aspect is investment in market oriented activitieswhich refers that EMNEs pay proper attention towards marketing activitiesbecause if marketing factor will not strong then to compete competitors willimpossible. The firms give proper consideration towards four P’s (Product,Price, Place, and Promotion) because success of a product depends upon thesefour P’s.
Ning et al. (2016) explains that urban innovation is derivedfrom intra-regional FDI and inter-regional FDI. Indigenous innovation indicatesto how much strong a firm in terms of skilled labor and other technology whichwill able to find creative and innovative products and techniques, for takebetter advantage of foreign technology EMNEs should have enough strong ininnovation level at home country, if they will have enough well skilledworkforce then they can easily adopt new foreign technology and innovativemethods of production. They can dominate in both host and home markets at sametime because of total quality management. However Fu et al. (2011) mentions that these two factors arevital for development of EMNEs but thinking beyond this these two are notsufficient factors but there are some other internal and external factors whichcontribute in it (Shi, & Wu,2016).
Whenever we talking about internal factorswhich directly indicates towards financial position of that particular firmbecause if a firm have not enough capital then that firm cannot compete to itscompetitors and they will unable to adopt new technology from abroad. Hu, D.,Wang, Y., & Li, Y.
(2017) mentions in their articles that exclusivetechnology is not only need of financial growth of emerging markets but alsoneed of to protect environment along with high productivities. Prodi, G.,Nicolli, F., & Frattini, F. (2017) also explains that Chinese governmentare becoming more and more aware to save it environment for coming generations.
Growth of EMNEs is also depends upon government activities and policies if theyare favorable than growth is guaranteed otherwise it is impossible. Emergingcountries’ governments are very active to rise knowledge of their countriesworkers for making them more skilled. Emerging countries are encouragingdeveloped countries for more and more Foreign Direct Investments, Indian primeminister went all around the world and convinced developed countries forinvesting in India as much as possible. They are easygoing many rules and laws sothat foreign companies can easily set up in their countries and county peoplecan take advantages from those foreign firms like good quality products,competitors can learn new methods of working, and generate national income too. In addition of this, availability of good quality rawmaterial plays vital role in growth of EMNEs. We can see from the history thatif a country has enough raw material then that particular country and firmswill develop rapidly. Only sophisticated technology can do nothing if you have no raw material,technology is a way of utilize that rare raw material for increasingproductivity by reducing production costs, minimizing wastage of raw material,and decreasing dependency on human beings. Emerging countries are developing dayby day, having good quality and large quantity raw material is the main reasonbehind it.
All BRICS countries have good quality raw material and now they haveenough modern technology for using that raw material in effective ways and alsohave enough strong and skilled workforce to handle all production activities.In past, they do not have technology and not enough skilled work force that’swhy they were dominated by many countries, like Indian dominated by British,Brazilian dominated by Portugal. But now a days, emerging countries have strongand they can dominate over developed economics. EMNEs are setting up easily indeveloped economics and creating high competition for DMNEs, there are manyreasons behind their recipe of success. First and for most, is facing diversityat home by customers choices. They used to able to understand the differentchoices and nature of different customers and they easily capture the attentionof their potential customers. Second factor is maintaining good relation with unfavorablegovernment policies because mostly in emerging markets EMNEs face moreunfavorable conditions as compared to developed countries and which makes themstronger and in other countries they set up easily and rapidly.
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