Business Networks, Enclave Formation, and the Failure of Foreign Investment to Transfer Technology

With these stakes in mind, our theoretical argument highlights the need to consider the processes used by MNEs in selecting partners and suppliers and identifying their perception of risk, the availability of information, and the search process. [...] The fact that the onus is generally placed on host country governments, firms and industry groups is indicative of the degree to which host countries are understood—if not explicitly identified—as the source of the mismatch and subsequent technology transfer failures. [...] With the exception of the creation of construction jobs and the sale of product output in the US, foreign MNE subsidiaries and local enterprises have little economic connection, thus limiting potential knowledge transfer and upgrading of capabilities. [...] In the context of the study of FDI and knowledge spillovers, the choice of suppliers by MNE subsidiaries is particularly important. [...] The importance of understanding how the MNEs facilitate—or fail to facilitate—the transmission of technology is illustrated by the extent to which MNEs establish subsidiaries outside their home countries, the range of countries that promote foreign investment as a means of gaining access to foreign technologies, and the influence of international organizations that encourage FDI as a ladder for de.