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Technological dependence in the Andean group

Published online by Cambridge University Press:  22 May 2009

Lynn K. Mytelka
Lynn K. Mytelka
Affiliation:
Lynn K. Mytelka is a professor in the Department of Political Science and the School of International Affairs at Carleton University in Ottawa, Canada. The author wishes to acknowledge with thanks the generous support of the Canada Council, Carnegie Endowment for International Peace, and the Social Science Research Council. The stimulating criticisms of James Caporaso, Louis Goodman, Gerry Helleiner, Jorge Katz, and Constantine Vaitsos, the interviewing skills of Luis Beltran, and the programming talents of Ramon Sepulveda were deeply appreciated.
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Extract

In the metalworking and chemical industries of Peru, Ecuador, and Colombia, the ownership structure of firms, their product sector, and propensity to obtain technology through licensing are closely associated. Foreign firms cluster in industrial sectors with complex and volatile technologies, in which their technological advantages permit the exaction of monopoly rents. Ownership structure and product sector, as well as firm size, are related to the firm's decision to obtain technology by licensing rather than by generating it autonomously or obtaining it through other means. Ownership structure, product sector, and licensing appear to interact with choice of machinery imports and research and development activities in such a way as to produce a “technological dependence syndrome” in which opportunities for “learning by doing” are consistently missed.

Type
Part II
Information
International Organization , Volume 32 , Issue 1 , Winter 1978 , pp. 101 - 139
Copyright
Copyright © The IO Foundation 1978

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References

1 The Acuerdo de Cartagena creating the Andean Group was signed in May 1969 by representatives of Bolivia, Chile, Colombia, Ecuador, and Peru. Venezuela joined the Andean Group in February 1973 following signature of the Consenso de Lima. A copy of Decision 24 is appended to Vaitsos, Constantine, “Foreign Investment Policies and Economic Development in Latin America,” Journal of World Trade Law Vol. 7, No. 6 (11/12 1973): 619–65.Google Scholar

2 Arrow, K., “The Economic Implications of Learning by Doing,” Review of Economic Studies Vol. 29 (1962).CrossRefGoogle Scholar

3 The literature on this subject is vast. See, in particular, Cooper, Charles and Maxwell, Philip, Machinery Suppliers and the Transfer of Technology to Latin America (Brighton, England: Sussex University, Science Policy Research Unit, 1975)Google Scholar, Helleiner, G.K., “The Role of Multinational Corporations in the Less Developed Countries″ Trade in Technology,” World Development Vol. 3, No. 4 (04 1975): 161–89,Google ScholarNadal, Alejandro, “Transfer of Technology and Multinational Corporations in Mexico,” (Paris: OECD, 11 1975),Google ScholarSercovich, Francisco Colman, Tecnologia y Control Extranjeros en la lndustria Argentina (Argentina: Siglo Veintuno editores, 1975).Google Scholar

4 Vigil, Fernando Gonzalez, Comercializacion de Tecnologia y empresas multinacionales en el Sector Manufactuiero del Peru (Lima: Institute Nacional de Planificacion, Informe No. 035–76-INP-OIP, 06 1976), p. 16.Google Scholar

5 Vaitsos, Constantine, The Process of Commercialization of Technology in the Andean Pact (Washington: OAS, Dept. of Scientific Affairs, 1971), p. 14.Google Scholar

6 Ibid.:31.

7 Stewart, Frances, “Choice of Technique in Developing Countries,” in Cooper, Charles, ed., Science, Technology and Development (London: Cass, 1973), pp. 99–122.Google Scholar

8 Newfarmer, Richard and Mueller, Willard, “Multinational Corporations in Brazil and Mexico: Structural Sources of Economic and Noneconomic Power,” Report to the Subcommittee on Multinational Corporations of the Committee on Foreign Relations, United States Senate, 94th Congress, 1st Session (US Government Printing Office, 1975)Google Scholar and Wionczek, Miguel, “Notes on Technology Transfer Through Multinational Enterprises in Latin America,” Development and Change Vol. 7 (1976): 135–55.Google Scholar

9 Stewart, op. cit. and Langdon, Steven, “Multinational Corporations, Taste Transfer and Underdevelopment: A Case Study from Kenya,” Review of African Political Economy Vol. 2 (01–04 1975): 13–35.CrossRefGoogle Scholar

10 Figueroa, A., “Income Distribution, Demand Structure and Employment: The Case of Peru,” Journal of Development Studies Vol. 11, No. 2 (1975): 20–31.CrossRefGoogle Scholar

11 Santos, Theotonio Dos, “La Crisis de la Teoria del Desarrollo y las relaciones de dependencia en America Latina,” in Jaguaribe, H. et al., La Dependencia politico-economica de America Latina (Mexico: Siglo Veintuno editores, 1970), pp. 149–87, 174–75.Google Scholar

12 Brewster, Havelock, “Economic Dependence: A Quantitative Interpretation,” Social and Economic Studies Vol. 22 (03 1973): 90–95, esp. 91.Google Scholar

13 Mansfield, E., The Economics of Technological Change (N.Y.: Norton, 1968),Google ScholarNabseth, L. and Ray, G.F., The Diffusion of New Industrial Processes: An International Study (Cambridge, England: 1974),Google ScholarRuttan, V., “Usher and Schumpeter on Invention, Innovation and Technological Change,” in Rosenberg, N., ed., The Economics of Technological Change (England: Penguin, 1971): 211–28.Google Scholar

14 Katz, Jorge, Importation de Tecnologia, Apprendizaje Local e Industrialization Dependiente (Washington: OAS Programa Regional de Desarrollo Cientifico y Tecnologico, Doc. No. AC/PE-5, 1972): Vol. 2, p. 1.Google Scholar

15 Ibid.

16 Freeman, Christopher, The Economics of Industrial Innovation (England: Penguin, 1974), p. 92.Google Scholar

17 Hansen, Philip, “The Impact of Western Technology: A Case-study of the Soviet Mineral Fertilizer Industry,” paper presented at the Conference on Integration in Eastern Europe and East-West Trade (Bloomington: University of Indiana, 26–31 October 1976), p. 2.Google Scholar

18 Cartagena, Junta del Acuerdo de, Technology Policy and Economic Development (Ottawa: International Development Research Centre, No. 061e, 1976).Google Scholar

19 Sagasti, Francisco and Guerrero, M., El Desarrollo Cientifico y Tecnologico de America Latina (Buenos Aires: Instituto para la Integracion de America Latina, 1974).Google Scholar

20 Stewart, op. cit.

21 A complex technology is one which is capital intensive, involves continuous rather than batch processing, is computer (numerically) controlled rather than manually operated, and is research intensive, requiring a high ratio of professional R & D manpower to total employment or a high ratio of R & D expenditures to net output. Freeman, op. cit.: 35.

22 Hansen, op. cit., pp. 2–3.

23 I would like to thank Jorge Katz, Gerry Helleiner, and Norman Girvan for pointing this out to me. As Girvan also noted, if the choice of product mix in the firm is determined by foreign tastes then licensing becomes a rational choice rather than the redevelopment of a foreign technology for a foreign product.

24 Arrow, op. cit.: 155.

25 Data on these Andean countries will be found in Appendix 1.

26 The impact of Decision 24 on direct foreign investment and technology transfer in the Andean Group is assessed in my paper entitled “Regulating direct foreign investment and technology transfer in the Andean Group,” Journal of Peace Research Vol. 2 (06 1977).Google Scholar

27 Additional data on the survey will be found in Appendix II.

28 Landes, David, The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present (Cambridge, England, 1969),Google ScholarKlemm, F., A History of Western Technology (Cambridge, Mass.: MIT, 1964),Google Scholar Nabseth and Ray, op. cit.

29 Wionczek noted that the two largest technology sellers in Latin America in terms of registered payments are pharmaceuticals and motor vehicles though only the former is regarded as a “high technology industry” while the latter is an industry in which “very little has happened … technologically speaking since Mr. Ford's Model T was assembled … more than 50 years ago.” Neither of these industries has exported “substantial technological innovations involving the change of production processes” to Latin America. Both, rather, “export to the region minor technological innovations which are aimed at product differentiation…. It is quite possible, therefore, that the distinction between high and low technology is of little use in understanding the technological contribution of MEs [MNCs] to the economic development of less developed countries.” (Wionczek, op. cit.: 143–44).

30 In Ecuador two chemical firms rejected interviews. Three chemical and one metalworking firm refused to be interviewed in Peru. While there were no refusals in Colombia, a small number of chemical and metalworking firms in Cali and Barranquilla were eliminated from the survey as interviews in these cities were precluded for reasons of time and money. It is also important to point out that although the refusal rate was low, a number of managers who agreed to the interview subsequently were unwilling to answer specific questions for reasons of confidentiality or were unable to do so because the firm's accounting procedures did not permit easy access to the kinds of data sought.

31 This share is much below the actual degree of foreign ownership in the overall Ecuadorian manufacturing sector. In a survey of 1,404 firms, the Ecuadorian Superintendencia de Companias identified fully 31.5 percent of the firms as foreign. de Companias, Superintendencia, Sintesis 1964–1971 (Quito: Republica del Ecuador, 1975), p. 23.Google Scholar

32 To license technology or technological knowledge means to sign a licensing agreement—a legally binding contract—either to produce a given product or to use a particular process. Licenses may or may not involve remuneration but most often they do in the form of royalties as a percentage of the value of sales.

33 As Louis Goodman has pointed out, this definition implicitly raises the issue of whether technology dependence is a state of mind or a behavior. The implications of viewing it as an attitude or a behavior and the importance of each are clearly important but the data available from this project unfortunately do not permit further exploration of the possible differences.

34 There is evidence that respondents try to please the interviewer and do so by expressing intentions they never held. To avoid this problem most questions were open-ended. Firms were, thus, not asked whether they intended to expand production, market abroad, or introduce new products. Rather managers were asked what the development plans of their firm were within the next five years. Such an open-ended formulation, it was hoped, would reduce the opportunity to please the interviewer. The direction of bias in the survey provides some indication that the responses do represent an honest assessment of future plans and future possibilities. Given that the project was supported by the Andean Group and that the Andean Group has advocated greater technological self-reliance, one would have expected to find a bias in the opposite direction from that which was found. Whether the responses are realistic, however, is not ascertainable, as there is no independent source to evaluate the capabilities of the firm to generate its own new product technology in the future.

35 Matovelle, Angel, Notas Sobre El Processo de Transfercencia de Tecnologia en El Sector Industrial (Quito: Junta Nacional de Planificacion, 1974),Google Scholar Nadal, op. cit., Vaitsos, The Process of Commercialization of Technology in the Andean Pact, op. cit.

36 Mytelka, op. cit.

37 Levitt, Kari, Silent Surrender: The Multinational Corporation in Canada (Toronto: McMillan, 1971),Google ScholarGovernment of Canada, Foreign Direct Investment in Canada (The Gray Report) (Ottawa, 1972).Google Scholar

38 Newfarmer and Mueller, op. cit., p. 18.

39 Cooper and Maxwell, op. cit.; Katz, op. cit.

40 I would like to thank Constantine Vaitsos for bringing this to my attention.

41 This is in contrast to several other studies which showed simple correlations between size and research and development activities. Thus a study of some 200 firms in Bogota, Colombia, revealed that there is a direct relationship between size of the firm and expenditures on R & D and the larger the firm the larger the R & D expenditures. Centro de Investigaciones para el Desarrollo de la Universidad Nacional de Colombia, Estudios Nacionales Sobre la Interaction Entre lasfuentes y los usuarios de la Information: Transferencia de Tecnologia en la Industria en Colombia l-Bogota (Washington, D.C.: OAS, 1971).Google Scholar

42 I am indebted to Jorge Katz for this idea. Katz, moreover, points out that completing the sequence could conceivably take a decade.

43 Stewart, op. cit.

44 Girvan, Norman, “Economic Nationalists and Multinational Corporations: Revolutionary or Evolutionary Change?” in Widstrand, C., ed., Multinational Firms in Africa (Uppsala, Sweden: Nordiska Afrikainstitutet: 1975), pp. 26–56.Google Scholar