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Negative impact of technology transfer on host country:

It is undeniable that technology transfer is an opportunity for the


undeveloped or developing countries can follow up with the developed ones.
Nevertheless, there are some problems that come along with the advantages
technology transfer bring.
The transfer of technology, however, can also bring negative effects. For the
purpose of holding advantages in technology in comparison with local companies,
the multinationals may have an adverse reaction to host country R&D. It is possible
that the multinational corporations may transfer to the host country firms
inappropriate technologies. Moreover, the host country would easily be dependent
on the technologies it counts on the multinational ones. As a result, the local firms
interest in production made by new technology will decrease.

In these

circumstances, the host country dependence on multinationals technology will be


perpetuated.
In terms of the labor force, there also exist negative consequences from FDI
inflows. The use of advanced technology by multinationals leads us to predict the
need for fewer workers than that used by local firms, leading to the consequent
increase in unemployment. Furthermore, the enterprises of the host country will feel
the support from the local less than it used to be. Some experts argue that local
authorities, verifying that multinationals are a source of training and improving the
levels of education in the country, reduce public spending in this area which
mitigate the effect of training of the labor force provided by FDI. Even worst, host
countries will witness a wave of intelligent outflow, high educated labors may leave
the country for there are no R&D activities that they can engage in the host country.
In other respects, further integration in the globalization thanks to technology
transfer will leave the host country facing problems. Mecinger suggests that
technology transfer has a far greater impact for imports than for exports, which
influences negatively the balance of payments. The negative effects are well shown
in import field, the multinationals when operating are desperate for a large quantity
and quality goods and raw materials and under most circumstances, these are not

available in host country. Put it another way, this investment made may have as its
main objective the supply of the local market and thus does not encourage exports.
Economic experts have claimed that FDI is one of the most way of spreading
economics problem, especially those that have occurred in the multinationals
countries of origin. Host countries become more open economies and more subject
to changes in the global economy.
Technology transfer help the companies produces cheaper product and
increase competition in the market. However, increased competition does not
produce only positive effects on the host country. Experts argue that this increased
competition leads inevitably to the closure of some local firms (that can not
compete with multinationals due to the advantages they have), which leads to
increased concentration in the sector, and in turn will lead to decreased competition.
In order to face the strong competition from multinationals, concentration can also
occur between local firms to achieve gains in economies of scale, reducing
competition.
Finally, another effect that is recorded by several studies is that caused by the
competition created in access to credit, which will bring negative consequences to
the host countrys economy. In fact, technology transfer through FDI cost quite a lot
of money and that will have multinationals tend to be partly financed by the host
countries financial markets. This increase in financing needs in the country will
have effects in that market, so it is predicted that the costs of credit increase and that
the access to credit changes. Multinationals financed in host countries will reduce
their ability to grant loans, making it difficult for local firms to obtain loans.
Additionally, FDI can cause a loss of domestic savings which further makes the
availability to grant loans worse. These problems in access to credit are mainly
experienced by local firms which have a smaller structure, and then find it difficult
to support the increased costs of credit, plus their weak bargaining power with
financial institutions. This competition for funding could preclude some local firms
from necessary investments for their development or even for their maintenance,
which may lead to their disappearance.

There are researching that is conducted in order to reduce these negative


effects, help the host country to benefits from technology transfer to have better
economics growth.