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Technology adoption via FDI? Lessons from brownfield investment in Serbia

Technology adoption via FDI? Lessons from brownfield investment in Serbia. John Gabriel Goddard Economist, ECSPF, World Bank. Outline of presentation. FDI: A solution for technology deficits? Case study of Serbia brownfield investment

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Technology adoption via FDI? Lessons from brownfield investment in Serbia

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  1. Technology adoption via FDI?Lessons from brownfield investment in Serbia John Gabriel Goddard Economist, ECSPF, World Bank

  2. Outline of presentation • FDI: A solution for technology deficits? • Case study of Serbia brownfield investment • Advantages & limitations of FDI as an absorption instrument • Lessons for investment and S&T policy

  3. Serbia case study • Brownfield FDI context • Industries: metal processing, household chemicals, pharmaceuticals, cement • Size at privatization: all 500+ employees • New owner: 4 large MNEs, 1 regional MNE, 2 domestic investor, 1 still SOE • Concentrated ownership

  4. Privatisation results 2002-07 Privatisation Agency, 2002 to 2007 (1st quarter) results

  5. Origin of FDI 2000-05

  6. Absorption pathwaysCase #1: Albus

  7. Absorption pathwaysCase #2: Merima Henkel

  8. Absorption pathwaysCase #2: Impol Seval

  9. Dimensions of absorption • Products: higher quality, new-to-the-firm innovation • Processes: standards & certification, machinery & equipment • Recruitment and training: managerial, technical; planned, as-needed basis • R&D: technology transfer & adaptation

  10. Intensity of capital investment

  11. Depth of restructuring • Reorganization -» new managers, new departments, outsourcing • Refocus product mix -» scrapping machinery/plants plus new investments

  12. Advantages & limits of FDI • Advantages versus other investors: • Greater financial capacity -» allows long-term investment plans • Higher potential for knowledge transfer • Procurement capacity -» lower costs • Sales networks -» improving margins • But also endogenous limits: • Decisions follow regional/global logic -» economies of scale dominate localized capacity

  13. Investor characteristics

  14. Conclusions • For investment policy: • Attracting high-quality strategic investors via appropriate privatization design • Coordinating investment plans via third-party advisors pre-privatization • Facilitating greenfield investment post-privatization • Supplier-development programs to increase vertical spillovers

  15. Conclusions • For science & technology policy: • Absorption infrastructure: science and technology parks, business incubators • …

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