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" The Role of Foreign Direct Investment as a Determinant of International Technology Transfer into Ethiopia’s Manufacturing Sector "
Abebe, Tesfaye Desalegne
David, Wilfred
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Latin Dissertation
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| Language of Document
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English
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| Record Number
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1106840
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| Doc. No
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TLpq2416882835
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| Main Entry
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Abebe, Tesfaye Desalegne
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David, Wilfred
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| Title & Author
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The Role of Foreign Direct Investment as a Determinant of International Technology Transfer into Ethiopia’s Manufacturing Sector\ Abebe, Tesfaye DesalegneDavid, Wilfred
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| College
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Howard University
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| Date
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2020
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| student score
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2020
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| Degree
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Ph.D.
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| Page No
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366
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| Abstract
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Evidences around the world confirm that technological capability has a determinant power in development. More importantly, they show that sustained economic growth hinges on technical change as framed by the endogenous growth theories. The role that can be played by appropriate industrial policy and foreign investment in building technological capability is immense. This study attempts to investigate the deterministic power of foreign direct investment in transferring technology from foreign to domestic firms in the context of the Ethiopian manufacturing industry. It also critically reviews the roles of industrial policy, science, technology and innovation (STI) as well as FDI policies of the country in creating the conducive environment towards a robust manufacturing sector. Using the various macro-economic data and innovation indicators, the study examines the overall structural transformation, performance of the manufacturing sector and FDI in the country. The study’s findings reveal that the country’s industrial policies have failed to generate a productive transformation in the economy. It also concludes that the policy incoherence, coordination failure and distorted incentive structure played a huge role in the weakening of the manufacturing sector that could have a tremendous growth potential. The study uses the annual Large and Medium Manufacturing Industries (LMMI) survey data produced by the Ethiopia Central Statistical Authority to investigate the technology transfer hypothesis in the Ethiopian context. Employing a repeated cross section method, for the years between 1996 and 2017, the study finds that foreign firms have no higher productivity than domestic firms, making the technology transfer argument less plausible. Secondly, it finds that foreign equity participation at firm level has no explanatory power for productivity differential in the horizontal spillover argument. Nevertheless, the foreign equity variable becomes positive at industry level (confirmed by another dataset and estimation method) making the overall horizontal spillover effect to be neutral, at best. In the vertical spillover testing models, the specifications to test the backward and forward linkages didn’t generate meaningful results. Out of the other technology transfer variables included in the estimation methods, only labor mobility from foreign firms to domestic firms had a positive and significant coefficient, while competition from foreign firms, imitation of products by local firms and use of international patents were not correlated with higher productivity. The overall hypothesis that technology’s smooth transfer takes place from foreign to domestic firms driven foreign investment is not confirmed by the findings of the study. However, the study wishes to flag a caveat in interpreting the results, the robust findings of which can be compromised due to very limited number of foreign firms in the survey and data quality. Future studies need to be done on sector by sector cases and focus on industrial clusters, using panel data econometric methods.
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Economics
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Public policy
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Sub Saharan Africa studies
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