IMPORTED TECHNOLOGY, ENTERPRISE SIZE AND R & D IN A NEWLY INDUSTRIALIZING COUNTRY: THE INDIAN EXPERIENCE
| Author | Homi Katrak |
| Published date | 01 August 1985 |
| DOI | http://doi.org/10.1111/j.1468-0084.1985.mp47003003.x |
| Date | 01 August 1985 |
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 47, 3 (1985)
0305-9049 $3.00
IMPORTED TECHNOLOGY, ENTERPRISE SIZE
AND R & D IN A NEWLY INDUSTRIALIZING
COUNTRY: THE INDIAN EXPERIENCE
Homi Katrak
INTRODUCTION
During recent years enterprises in sorne of the newly industrializing
countries (NICs), including Brazil, India and South Korea, recognizing
the importance of technical progress for improving their economic
performance, have been following a strategy that entails the use of
imported and indigenous technologies. Typically the enterprises first
acquire foreign technologies and then undertake research and develop-
ment (R & D) to adapt those technologies to the local environment.
The reason for turning in the first instance to imported technologies
is often explained by the belief that they involve lower uncertainty
and/or a more favourable time-cost trade-off than indigenous tech-
nologies; the subsequent R & D is required because the imported
technologies are often not entirely appropriate with respect to domestic
consumers' tastes, market-size, factor prices, etc. This strategy of
importing a technology and then adapting it may be called an 'import
and adapt' technology (TAT) strategy.
The TAT strategy has sometimes been criticised on the grounds that
it may inhibit the development of an indigenous technology capability
and consequently make the country permanently 'dependent' on
foreign technology. However, an opposing view would be that the use
of imported technologies is likely to be relatively important only in the
early years of a country's industrialization and that it will become less
important in later years; the technological expertise gained in the
process of adapting imported technologies will help build up an
indigenous technological base which will enable the NICs to reduce
their future dependence on imported technologies and perhaps even to
become 'self-reliant' in technology. This latter argument seeks support
from the Japanese experience: whereas during the 1950s and 1960s
Japan's R & D was aimed mainly at adapting imported technologies,
* Grateful acknowledgement is due to the Nuffield Foundation for financial assistance,
under its Social Sciences Small Grants Scheme, which helped in the research for this paper. An
earlier version was presented to a seminar at Queen Elizabeth House, Oxford and to a meeting
of the ESRC-sponsored Development Economics Study Group. I am grateful for helpful
comments to S. Lall, R. Junankar and F. Stewart.
213
214 BULLETIN
the experience so gained has enabled that country subsequently to
generate indigenous technologies.
This paper undertakes an empirical analysis of two questions relevant
to the R & D of the contemporary NICs. The first question pertains to
the aim of self-reliance in technology. Has the IAT strategy had a
significant stimulative effect on local R & D? Has the experience gained
by adapting imported technologies generated sufficient indigenous
capabilities as to make it likely that those countries are becoming
'self-reliant' in technology? The second (and related) question is
whether the expenditures on adaptive R & D are likely to differ
between certain types of enterprises: large and small, indigenous and
foreign-owned, private and public.
Both of the above questions are of an empirical nature, and so the
answers may differ between one NIC and another. The present exercise
is, however, restricted to the experience of only one such country.
namely India. The reasons for choosing India as a case study are as
follows. First, that country has followed the IAT strategy for a rela-
tively long period of years, secondly, technological self-reliance seems
to be a declared objective of the country's government and of its
enterprises, and thirdly the available data (though not entirely satis-
factory) makes it possible to distinguish between the different types of
enterprise mentioned above. A further reason is that, as reported in
UNIDO (1984), a few enterprises in India have achieved noticeable
success with the IAT strategy. We wish to see whether a similar picture
will emerge from the present study involving regression analysis based
on a wide range of enterprises and industries.
This paper is concerned only with the R & D performed by individual
enterprises (private and public): Desai (1975) has pointed out that
their R & D is intended mainly to adapt important technologies for
commercial use. The R & D undertaken by the government and that
performed in government-sponsored institutions, e.g. the Council of
Scientific and Industrial Research, is not examined because, as Desai
(1980) and Alam and Langrish (1984) point out, a large proportion of
the resulting technologies is not taken up for commercial purposes.
Section II considers the notion of self-reliance in technology, while
section III examines reasons why expenditures on R & D may differ
between different types of enterprise. Section IV discusses the data
used in the empirical tests and section V reports the results. Section VI
summarizes the main findings and considers some questions for further
analysis.
II. TECHNOLOGICAL SELF-RELIANCE
To begin with we need a definition of technological self-reliance in a
NIC. A simple definition is that an enterprise (or a county) has 'caught-
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