THE REGULATION OF TECHNOLOGY TRANSFER BY MULTINATIONAL CORPORATIONS (BARGAINING POWER)

Many developing countries now rely on external sources of technology to become industrialized, but the effects of this dependence are unclear and controversial for society development patterns. Much of this technology is transferred by multinational corporations (MNCs), but the high costs and restricted conditions of transfers are subject to dispute and government regulation.;The process of technology transfer by MNCs became more politicized and negotiable in the industry during the 1970s. The costs of transfers were determined more by organizational and bargaining power factors than by economic processes. Government regulation reduced royalty payments and restrictive business practices in technology licensing agreements, but host nations were still dependent on imports and new products from MNCs. The bargaining position of host governments improved as competition among oligopolistic MNCs increased and pharmaceutical technology matured. More investments in local raw material manufacturing were stimulated, and internal transfer pricing manipulation was reduced by government regulations. Nonetheless, the developing countries in Latin America were still dependent upon MNCs for complex technology and new products created in other locations.;This case study of MNC behavior and government regulation in one internationally organized industry has implications for technology transfer and industrialization processes elsewhere. Predictions of dependent societal development constraints were confirmed, but moderated by the corporate strategies of MNCs and the exercise of bargaining power by elites in host governments. Increased international competition and wider technological diffusion are likely to reduce the future costs of dependence.;This study examines the changing terms and organizational forms of technology transfer by MNCs within the pharmaceutical industry in Latin American countries. Host government regulation was able to attract entries by MNCs and reduce their level of direct contractual costs for transfers, but also encouraged more unregulated internal transmission within MNC organizations. The internalization of imperfect markets for intangible marketing and technological advantages avoided stricter host regulations, but simultaneously increased policy conflicts with governments.