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Open Innovation and New Mechanism of Market-Based Technology Diffusion from MNCs
Zheng Feihu (郑飞虎), Cai Hongbo (蔡宏波), Zhong Xin (仲鑫)*
School of Economics and Business Administration, Beijing Normal University, Beijing, China
Abstract:The international community has blamed developing countries for the lack of intellectual property rights (IPR) protection – not least the “forced technology transfers” – in attracting foreign direct investment (FDI). This paper employs the largesample contract data of multinational companies’ (MNCs) IT R&D transactions in China to discuss this controversy from a unique perspective of MNCs in the role of contractors. Our findings suggest that MNCs initially guarded their know-how before the 2000s under closed innovation, but have started to take the initiative to transfer technology to local partners as open innovation held sway. China’s structured market entities and huge demand for technology transactions have served as key drivers for MNCs to transfer technology, which has been further boosted by the new business model of open innovation. This paper’s empirical analysis not only helps unravel the “black box” of technology transfers by MNCs, but reveals how late-moving developing countries may make better use of FDI referencing China’s experience on the three dimensions of market opportunities, structured entities, and economies of scale.
Keywords:open innovation, foreign direct investment (FDI), market-based technology diffusion, initiative to match between supply and demand
JEL Classification Codes: F23, L24, O32
DOI: 10.19602/j.chinaeconomist.2020.11.07
