Technology, Productivity and the Multinational Enterprise
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Productivity
Multinational
and
the
Enterprise SylviaOstry*
UNIVERSITY OFTORONTO
This article reviews the relevance of the transactionscosts model to the role of the firm in production and diffusion of knowledge. A revival of interest in technology, productivity and growth has generated a new empirical and theoretical literature. A review of these developments suggests that they have not yet been reflected in significant adaptation of the conventional firmversus-market concept. Research has been severely hampered by data gaps and suggestions are made with respect to improvements in the information base. Finally technology issues are and will be of increasing significance in both domestic and international policy, and must be factored into the conceptual template of corporate strategy. INTRODUCTION
he 1996 edition of RichardCaves,
T
Multinational Enterprise and Economic Analysis, provides an excel*
lent summary of both the theoretical and empirical literature stemming from the transactions -costs model. This template is particularly relevant to the technology issue since at the heart of the firm-versus-market concept is knowledge, and the raison d'etre of the multiplant and multinational enterprise (MNE) is rooted in the fundamental flaws in markets for intangible assets. But, of course, adherence to any template - which, by definition, is restricted to "key" variables - will exclude both issues and literature that do not fit into the master design. As these issues proliferate the question naturally arises as to whether the basic theory can or should be adapted. This article will not attempt to grapple with the theoretical questions, but rather try to summarize some of the analytical and empirical work related to knowledge production and dissemination that highlight the inadequacy of the transactions-costs approach. Research in this area is severely hampered by data gaps - a not novel complaint, of course, but arguably more acute here than in other fields - so some suggestions will be made with respect to data and research proposals. Better data, more empirical analysis and more analysis of the inadequacies of the
Distinguished Research Fellow, Centre for International Studies, University of Toronto.
JOURNAL OF INTERNATIONALBUSINESS STUDIES, 29, 1 (FIRSTQUARTER 1998): 85-99.
85
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TECHNOLOGY, PRODUCTIVITY AND THE MNE
basic model could, of course, lead to adaptive improvements (incremental innovation), or even a dramatic breakthrough in the form of a new model. But there is a long way to go, and whether by 2020 there will be a new or significantly improved version of the firm-versus-marketconcept is - like all innovation - beset by uncertainty.
Finally, because the traditional approach virtually ignores the interaction between MNEs and governments in the policy process, this article will also briefly review some of the key policy issues that arise
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