Can Host Innovation Systems in Late Industrializing Countries Benefit from the Presence of Transnational Corporations? Insights from Thailand's Manufacturing Industry

Abstract

Innovation systems in late industrializing countries are said to be ill-developed and fragmented, lacking crucial key resources and access to technology and knowledge. At the same time these national innovation systems (NISs) host subsidiaries of transnational corporations, which could contribute to the development of the NIS due to their advanced technology and capabilities. This paper considers data from innovation surveys, self-assessment of technological capabilities and qualitative interview information in order to establish two things: firstly, the technological activities and capabilities of foreign affiliates and domestic firms in Thailand (as compared to Singapore, Penang and Europe), and secondly, the main mechanisms by which foreign affiliates foster upgrading in domestic firms and in the innovation systems themselves.

Acknowledgement

The authors would like to thank their cooperation partners in Thailand: Dr Chatri Sripaipan and Dr Patarapong Intarakumnerd of the National Science and Technology Development Agency and Dr Peter Brimble of Asia Policy Research. The research project received funding from the German Research Foundation (DFG) and the empirical interviews in Thailand were made possible by a doctoral scholarship from the German Academic Exchange Service (DAAD).

Helpful comments from Brigitte Nones, Helmut Gassler, several participants of the DRUID summer conference 2006 and two anonymous referees on early versions of this paper are gratefully acknowledged.

Notes

Thailand Standard Industrial Classification (TSIC 1972) is based on ISIC Rev. 2. While the first four digit levels are identical to ISIC, the fifth digit level was adopted to Thailand specific conditions (UN Statistics Devision, 2004). TSIC 1972 has been used as the basis for the first and second R&D/Innovation Survey. Since 2001 ISIC Rev. 3 has been adopted.

Original equipment manufacture (OEM): Under an OEM agreement a TNC customer provides a latecomer-supplier with the precise specifications of a product. The product is manufactured by the supplier, sold to, marketed and distributed by the TNC under its own brand name (see Hobday, 2000).