(pp.001-032) F. S. Harhara, A. Al-Roubaie and W. Al-Karagouli ‘Host country factors and inward FDI-induced technology transfer in UAE’, IJIKMMENA, Vol. 3, No. 1, 2014
Purpose: The purpose of this study was to investigate the host country factors that impact the transfer of technology arising from Foreign Direct Investment for a resource-rich nation such as the United Arab Emirates.
Design/methodology/approach: Consistent with prior literature, a labour productivity model that isolates the effects of increased capital intensity has been developed to proxy for the presence of technology transfer. Using an OLS model, the dependent variables were the stock of FDI, imitation, labour mobility, trade openness, absorption capacity, economic development, competition and institutional development. The model was estimated using data for the period 1980 to 2010.
Findings: The study found that the level of economic development positively impacts on labour productivity, which is consistent with prior research. There is also evidence to show that absorptive capacity has a positive impact on the level and speed of technology transfer from the MNEs to domestic firms. The level of competition due to the presence of MNEs encourages domestic firms to reassess their production processes and innovate in order to remain competitive. The study found a negative impact for trade openness, contrary to prior studies showing that this is due to the importance of the re-export sector in the economy.
Originality/value: The key value of this study is its identification of the important host country factors that can lead to technology transfer for a small resource-rich country that is the third largest re-export centre and the main beneficiary of non-hydrocarbon-based inward investment in the Gulf region.
Keywords: Foreign Direct Investment; Technology Transfer; Host Country Factors; Knowledge Transfer; Absorptive Capacity; UAE
Paper type: Empirical investigation