Technology adoption via FDI? Lessons from brownfield investment in Serbia - PowerPoint PPT Presentation

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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 • …