Asian Transnational Enterprises and Technology Transfer in Thailand

Abstract

Like many of its neighbours, Thailand is increasingly interested in upgrading the technological capability of its indigenous firms through the inward investment (foreign direct investment, FDI) of transnational enterprises (TNEs). Its science and technology policies, however, remain fragmented, and they compete with regional distribution priorities. This paper examines the nature of technology transfer between Asian TNEs (Japan and the newly industrializing economies (NIEs), that is, the NIEs of Hong Kong, Singapore, South Korea and Taiwan) and Thai firms based on the responses of some 145 firms from a 2005 survey. It finds only modest levels of technological transfer in production and process technologies. Asian TNEs evaluate factor cost advantages and government incentives favourably. Logistic regressions, however, indicate that government incentives are negatively related to technology process modification between NIE subsidiaries and Thai customers. But, the technical training of Thai workers significantly increases the likelihood of Asian subsidiaries undertaking process technology transfers. Among NIE firms, the ability to import foreign skilled labour further increases the likelihood of such technological activities. Finally, forward linkages among the NIEs are positively associated with firm location in the urban agglomerations of Bangkok and Chon Buri, and, among smaller firms. Our study suggests that prevailing FDI policies have little influence on technology transfer, while technology policies that favour large TNEs work against smaller NIEs that are engaged in modest technology transfer.

Notes

The following example illustrates the importance of follow-up telephone interviews in securing high response rates in Thailand. The Office of Industrial Economics under the Ministry of Industry had conducted an industrial survey of 10 industries in 1999. It managed to secure a 90% response rate after extensive follow-up telephone calls and interviews. In contrast, when it revisited its findings in a 2000 survey, this time relying only on a mail survey, the response rate was less than 30% (www.oie.go.th/IndStatistic/statistics.asp, accessed 18 March 2006).