Multinational Corporations and Patterns of Local Knowledge Transfer in Costa Rican High-Tech Industries

Multinational Corporations and Patterns of Local

Knowledge Transfer in Costa Rican High-Tech Industries

Elisa Giuliani

ABSTRACT

Over recent decades, governments in industrializing countries have promoted policies to attract foreign investors, anticipating the benefits of technology transfer to host economies. During the 1990s, Costa Rica adopted an industrialization strategy based on attracting high-tech multinational companies (MNCs). Using an original survey of a sample of high-techMNCsubsidiaries, this article shows that the new wave of efficiency-seeking subsidiaries tend not to transfer knowledge to domestic firms even when they establish backward linkages with them. Instead, most of the knowledge transfer occurs between high-tech foreign subsidiaries. This has clear policy implications for host country governments.

INTRODUCTION

Several studies have explored the role of multinational companies (MNCs) in the economic development of host industrializing countries, and their effects on domestic firms’ productivity. The existing evidence is mixed (G¨org and Strobl, 2001), but successful cases such as Ireland and Taiwan (G¨org and Ruane, 2000; Guerrieri et al., 2001; Kishimoto, 2003; Saxenian and Hsu, 2001) suggest that policies designed to attract ‘high-tech’ foreign direct investment (FDI) may have an impact on domestic firms and may constitute an opportunity for the creation of dynamic industries and clusters (Altenbur and Meyer-Stamer, 1999; UNCTAD, 2001). The inflow of foreign investments is believed to generate several positive effects in host economies. Foreign investors may create internal demand for intermediate inputs,which can induce changes in the host country’s industrial structure and ‘kick-start the development of local industry’ (Barrios et al., 2005: