Knowledge absorption and production in developing regional economies
An MNC subsidiary can be seen as a conduit for bringing in superior knowledge from advanced economies. To determine if the evidence supports this, the project RACCOM (Regional absorptive capacity and the contribution of multinational corporations to knowledge production in the local economy within a developing economy context: The case of China) analysed regional development in China. The innovative approach involved focusing on a region as a unit of knowledge absorption rather than a firm, and on related knowledge flow rather than outcomes (e.g. improved productivity). In this context, one primary objective was to measure the contribution of MNC subsidiaries to local knowledge production and compare it against that of local firms. A second was to explain the difference, using an econometric model, between the abilities of cities and regions to learn from MNC subsidiaries. Researchers chose China as a case study due to its status as a leading economy and the fact that it is a vast country with MNCs in many regions. The distinct economic and development gaps existing among these regions provided a natural experiment base regarding knowledge spillover at different development levels. Contrasting technology levels and gaps in related competence among Chinese firms points to significant potential for tail-end firms to take advantage of knowledge absorption. Reviews of scholarship on the subject included the abstracts of over 100 academic journal articles in Chinese and more than 100 English-language academic journal articles. Researchers liaised with Chinese experts to decide on a research methodology and analytical framework. They set up a database with information from the Chinese census authority on firms and on cities and urban areas. The team's work included an analysis of data regarding the measurement and description of knowledge spillovers. Project outcomes should help advance knowledge on where China's research and development strengths lie. Leveraging subsidiaries as knowledge assets for MNCs from strong economies can help boost economic development for the countries and regions where they are established.
