Key of success: combination of Home-grown Innovation and Foreign
Technology in the Growth of EMNEs.

Abstract:

In this article, we examine
theoretical and experiential understanding about need of foreign technology and
indigenous innovation discipline post the publication of Xiaolan Fu, Carlo Pietrobelli,
and Luc Soete, (2011). In their paper, Fu et al. (2011) provides useful
information about these two factors. Although they give enough information but
in our perspective we will explain why these two factors are very important in
the growth of any EMNEs in this competitive era, and we will find what main
aspects are which makes these factors very crucial. In addition of this we will
find other factors without these two can plays imperative role in the growth of
EMNEs. We are going to advance beyond rethinking about their article and try to
explain more.

Keywords: indigenous innovation, foreign technology, total quality
management,

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 Introduction:

“The Role of Foreign Technology and
Indigenous Innovation in the Emerging Economies: Technological Change and
Catching-up” (Xiaolan Fu, Carlo Pietrobelli, and Luc Soete, 2011) is one of the
most significant publications in international business and emerging economics.
They has been cited 299 articles to make this publication according to google
scholar. In their article, they explain how foreign technology and indigenous
innovation plays important role in set up of a firm in emerging markets and
they explain this factors by evidence of annual growth in GDP of the emerging
countries. Fu et al. mention that rise in the emerging economies has changed
the scenario of world economy, in 2007, the annual GDP of china was 13%, the
annual GDP of India was 9.1%, and the annual GDP of Brazil was 5.4% at that
time (Fu et al., 2011).

The title of the article hints that
how EMNEs are growing day by day and what are main reasons behind it.  In the 3rd point of the article
explain how foreign technology is spreading day by day and how developing
countries are adopting these technologies from developed countries. To extend
it further Fu et al. (2011) explains that foreign direct investment is first
ways of spreading technology, imports technology from abroad by developing
countries and EMNEs is second way of technology diffusion. Furthermore
internationalization of research and technology and technology transfer,
integration in global value chain and technology transfer are other methods
which helps to transfer exclusive technology from one firm to other or one
country to other country. In the article, further they explains why indigenous
innovation is important along with technology and explained deeply main
benefits of indigenous innovations and how this factor relates to catching up
foreign technology. In the second last segment, they tried to answer the
question of is foreign technology and indigenous innovation complements or
substitutes? And after that makes final conclude about their article.

Contributions of Xiaolan Fu, Carlo Pietrobelli, and Luc Soete:

For us, Fu et al. (2011) signifies
a great result regarding to use of foreign technology along with this also
tried to explain homemade innovations which makes EMNEs successful in
competitive era.

Rather than dive into that debate
directly, 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 analysis
as a basis for raising a list of queries as to whether or not we have acquired
as 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 about
this important aspects, (3) to discourse whether those publications represent
any material advancement and, if so, how so.

Our first step was to search at all
the articles that were cited by Fu et al. (2011) which were obtained from
different websites, and we tried to read those articles with more deeply
understanding for finding some other factors which can plays significant role
in growth of EMNEs especially in the emerging markets.

We found 299 articles which were
cited by Fu et al. (2011) are available on sciencedirect.com, oup.com,
manchestert.ac.uk, aau.dk and so on. We categorized these articles utilized the
foreign 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 articles
which relates to these countries rather than mention all of these, this table
explains that Fu et al. consider all BRICS countries and all pay attention
towards some European countries too to make this article. It indicates that
they searched a lots and tried to what was the effect of adopting foreign
technology in these emerging markets.  To
explain their point of views, they insert a graph in their articles and I will
explain it more deeply. They mention that India started using latest from the
year 1980 and the annual GDP growth was on increasing trend, China, South
Africa, Brazil were started utilization of foreign technologies from
respectively in the year of 1979, 1980, 1964. On the other hand, japan and
other developed countries which had exclusive technology since 1960 and that’s
why they dominated the world economy. We can see in history that British went
to India and other countries for taking advantages of rich quality raw
material, cheap labor costs and all this only became true due to having best
technology at that time too. Technology made them able to take advantages from raw
otherwise if we see the distance between both countries it look impossible.

On the second aspect they mention
indigenous innovation which escalate the overall growth of any EMNEs. We all
also agree with this factor because if any country has no indigenous innovation
then there is no value of foreign technology, so these both factors inter
connect with each other. We can see that if any emerging country is going
forward behind this there is great contribute of local brains, local skills,
and innovating techniques. A perfect example of this statement is India, now a
days India is country which is famous for its well skilled and highly qualified
work 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 abroad
for further study and learn some valuable skills and then introduced different
policies so that they can return their home countries, and can share their
learning with their home people and firms. By doing this, they increased their
standard of handling latest technology, and searching new methods and
production techniques so that they can make VRIN products and can dominate
emerging markets as much as they can. These BRICS countries are spending on
Research and development factor because they know better what the need of
today’s world is and how to be number one in the world. In these countries have
exponentially increased their expenditure on research and development sector.
Fu et al. (2011) states that China’s total expenditure on R was greater
than France, Germany, and it was about 3rd of total as whole European
Union’s expenditure on R&D.

Foreign direct investment is big
and important factor which enhance the level of indigenous innovation in these
countries too. Eden et al. (1997) mentions in their article that technology
transfer due to foreign direct investment has given positive and effective
results for FDI hosting countries. Whenever the FDI hosting countries labor
work with new techniques and latest technology then they learn how to handle
these technology and they become more skilled which are competitive advantages
for country.

 Rethinking:  other factors rather than Foreign Technology and Indigenous Innovation
which are essential in growth of Emerging Economics.

The foreign technology plays important role in the growth of
all emerging markets as a proof of this statement the annual GDP has been
increased dramatically in emerging countries, the annual growth in GDP in China
was 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 of
business but also crucial for to compete market competitors and to stay in the
market for long term. Frank et al. (2016) determine that their main four
efforts of innovation which are investment in human resources and
organizational culture, investment in technology, investment in social capital,
investment in market oriented activities. These factors explain that how firms
spend their money for being king of the market. The international firms special
in emerging markets they always try to hire highly skilled work force and try
to create such kind of environment which can produce overall profit in terms of
production as well as total quality management. 
Second efforts that is investment in technology refers that EMNEs spend
lots of money in R&D activities, technology exchanges, and purchase latest
and sophisticated machinery for making VRIN (Valuable, Rare, Imperfectly
Imitable and Non-substitutable) products for holding market shares. Third
factor, investment in social capital explains that participating in in R&D,
maintaining relation with customers, research institutions, and other
competitors so that firms can update their information regarding current trends
and market positions. Fourth aspect is investment in market oriented activities
which refers that EMNEs pay proper attention towards marketing activities
because if marketing factor will not strong then to compete competitors will
impossible. The firms give proper consideration towards four P’s (Product,
Price, Place, and Promotion) because success of a product depends upon these
four P’s.  

Ning et al. (2016) explains that urban innovation is derived
from intra-regional FDI and inter-regional FDI. Indigenous innovation indicates
to how much strong a firm in terms of skilled labor and other technology which
will able to find creative and innovative products and techniques, for take
better advantage of foreign technology EMNEs should have enough strong in
innovation level at home country, if they will have enough well skilled
workforce then they can easily adopt new foreign technology and innovative
methods of production. They can dominate in both host and home markets at same
time because of total quality management.

However Fu et al. (2011) mentions that these two factors are
vital for development of EMNEs but thinking beyond this these two are not
sufficient factors but there are some other internal and external factors which
contribute in it (Shi, & Wu,2016).  Whenever we talking about internal factors
which directly indicates towards financial position of that particular firm
because if a firm have not enough capital then that firm cannot compete to its
competitors and they will unable to adopt new technology from abroad. Hu, D.,
Wang, Y., & Li, Y. (2017) mentions in their articles that exclusive
technology is not only need of financial growth of emerging markets but also
need of to protect environment along with high productivities. Prodi, G.,
Nicolli, F., & Frattini, F. (2017) also explains that Chinese government
are becoming more and more aware to save it environment for coming generations.
Growth of EMNEs is also depends upon government activities and policies if they
are favorable than growth is guaranteed otherwise it is impossible. Emerging
countries’ governments are very active to rise knowledge of their countries
workers for making them more skilled. Emerging countries are encouraging
developed countries for more and more Foreign Direct Investments, Indian prime
minister went all around the world and convinced developed countries for
investing in India as much as possible. They are easygoing many rules and laws so
that foreign companies can easily set up in their countries and county people
can 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 raw
material plays vital role in growth of EMNEs. We can see from the history that
if a country has enough raw material then that particular country and firms
will 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 increasing
productivity by reducing production costs, minimizing wastage of raw material,
and decreasing dependency on human beings. Emerging countries are developing day
by day, having good quality and large quantity raw material is the main reason
behind it. All BRICS countries have good quality raw material and now they have
enough modern technology for using that raw material in effective ways and also
have enough strong and skilled workforce to handle all production activities.
In past, they do not have technology and not enough skilled work force that’s
why they were dominated by many countries, like Indian dominated by British,
Brazilian dominated by Portugal. But now a days, emerging countries have strong
and they can dominate over developed economics. EMNEs are setting up easily in
developed economics and creating high competition for DMNEs, there are many
reasons behind their recipe of success. First and for most, is facing diversity
at home by customers choices. They used to able to understand the different
choices and nature of different customers and they easily capture the attention
of their potential customers. Second factor is maintaining good relation with unfavorable
government policies because mostly in emerging markets EMNEs face more
unfavorable conditions as compared to developed countries and which makes them
stronger and in other countries they set up easily and rapidly.

In conclusion:

Our goal in this article was to provide a different viewpoint
on this factor role played by Fu et al. (2011) in understanding in role of
foreign technology and indigenous innovation in the emerging economics. There
is no denying the fact that it is a great and most knowledgeable article which
helps to understand emerging economics deeply, our goal was to rethink beyond
these factors and we tried to find what others factors can be which plays
imperative role in overall growth of EMNEs in emerging economics.  

 

                                                          
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