Vanderbilt Journal of Transnational Law


Jack Baranson

First Page



The changes of the 1960's point to two important trends in the 1970's--the continuing erosion of the foreign investment base and an expanding drive toward technological self-reliance. These tendencies have important implications for future operational modes of multinational corporations and for further adjustments in the world economy. First, developing countries will continue their efforts to eliminate foreign ownership and control of their industries and their preference for licensing arrangements and management services will continue to erode the foreign investment base. Secondly, developing countries will not be satisfied with the transfer of manufacturing techniques and related management systems. They will want to acquire design and engineering capabilities as part of the licensing arrangement in order to achieve technological self-sufficiency, at least in selected industrial fields.

These trends have important implications for the future role of foreign enterprise in the economic development of newly industrializing nations. In place of the heavy reliance on equity investment as an earnings base, foreign industrial enterprises will have to repackage goods and services and price them accordingly. Just as multinational corporations in an earlier period shifted from marketing to manufacturing, so they will have to train new cadres of transfer agents and develop new operational modes to accommodate the emerging LDC demand for transferring design and engineering capabilities.

For the United States, as for Europe and Japan, these trends mean further adjustments in the international division of labor, as developing nations acquire for themselves the standard range of industrial technology. If the United States is to maintain its technological lead, as a supplier of technology and management packages, from which an increasing share of its international earnings may come, maintenance of investments in research and development will be a critical factor.