FDI boosts tech transfers but performance can lag

Friday, May 10, 2013 11:30

Illustrative image.

HA NOI (Biz Hub)– While foreign investment is a good indicator of technology transfer in Viet Nam, such transfers do not necessarily improve performance, said speakers at a scientific workshop on competitiveness held in the capital on Wednesday.

From 2010 to 2011, a team of researchers from the University of Copenhagen led by Dr. Theo Talbot sought to understand the interaction between technology transfer, foreign direct investment (FDI) and profits.

Firms produced output using labour and capital, while technology amplified and combined these inputs.

Therefore, increasing the rate of technology transfer should increase the quality as well as quantity of output, Talbot said at the workshop.

The study, which surveyed nearly 7,000 firms across the country, showed that technology transfer and foreign investment were strongly connected - and that FDI really could predict technology transfer.

However, the question remained whether those transfers improved a company's performance.

Probing deeper, the researchers found that forward transfers (those from a local FDI firm or international client to a Vietnamese customer) appeared to be related to higher profits, while backward transfers (in which a supplier was at the receiving end) were not.

Self-reported technology transfers were not generally associated with higher profits, Talbot added.

If this finding holds up after further investigation, technology benefits for Vietnamese firms are most likely to be found in sectors that add value to inputs supplied by non-Vietnamese firms.

Participants at the workshop also discussed Corporate Social Responsibility (CSR) in relation to labour productivity and competitiveness.

CSR refers to activities that protect workers' rights, environmental standards, human rights, the community and fair trade. These activities can be formal, such as certification or membership in international organisations, or informally built into firms' corporate strategies.

Professor John Rand from the University of Copenhagen said there was a positive and well-determined association between the level of CSR and labour productivity.

The workshop was held by the Central Institute for Economic Management under the Ministry of Planning and Investment. — VNS

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