As regards hard technology and equipment, in telecommunications, for instance, market entry by international operators from both developing and developed countries has contributed to the rapid diffusion of digital mobile telephone technology across the developing world (Rouvinen, 2006; Ure, 2008; box III.16).
This technology has significantly lowered the threshold of access to and usage of information and communication technologies (ICT) for developing countries (UNCTAD, 2007l). Similarly, international terminal operators such as Hutchison Port Holdings (Hong Kong, China) and APM Terminals (the Netherlands) (table III.15) have helped improve the efficiency of cargo handling by introducing new equipment and processes in container ports around the developing world, along with the expertise required for their efficient use.
TNCs can also help improve productivity and efficiency by transferring soft technology to host country operations. A number of studies show that TNCs that took over State owned service utilities made changes to processes that reduced costs and delivery times and, in some cases, improved quality standards (World Bank, 2002; Platz and Shroeder, 2007). Changes introduced included re engineering of operational processes, improving procurement and subcontracting practices, and enhancing client records and collection methods.
Overall, studies show that the introduction of hard and soft technologies by foreign affiliates has helped enhance labour productivity in services provision in a number of cases. In Latin America, for instance, between 1994 and 2000 labour productivity increased by about 6% annually among privatized electricity distributors, most of which involved TNC participation, partly because of reorganization of operations (Estache and Rossi, 2002). (However, improved technology and enhanced productivity may also lead to retrenchments in the labour force, as discussed in section C.)
Another study on Latin America found that labour productivity increased significantly for privatized fixed telephone services, electricity and water supply, as TNCs improved the systems in place (Andres et al., 2005). In India, labour productivity in port terminal operations rose dramatically after the participation of TNCs, which led to the introduction of newer technology and human resource management practices (Nazareth, 2008). In mobile telephony in some African countries, productivity measured by subscribers per employee has risen significantly after TNC entry, and it tends to be higher than in developed countries (Minges, 2007).
Looking beyond pure productivity and efficiency considerations, the introduction of technology by foreign affiliates has also helped improve the reliability and quality of service provision in a number of cases. Poor quality of services and inadequate maintenance of networks were often the most serious problems in earlier public provision of infrastructure services in developing and transition economies, even in some relatively high income economies.
Case study evidence on the results of TNC involved privatization and concessions in infrastructure industries show improvements in the reliability and quality of service provision as a result of investment in new hardware, systems and training (World Bank, 2001; Shirley, 2002; Jerome, 2004; UNCTAD, 2007; Nazareth, 2008).
The industry wide impact of technology transfer by TNCs also depends on their transmission of technology to other firms in the industry. To the extent that technologies and knowledge are firm specific, the potential for wider dissemination may be more limited in the case of wholly owned foreign affiliates, as compared with other modalities of TNC participation, such as joint ventures or non equity participation.
In China's electricity generation industry, for instance, TNC participation in large joint venture projects has involved systematic and comprehensive project management cooperation between foreign investors and their Chinese counterparts, enabling the latter to enhance their expertise and efficiency (Wang, 2008).
The capabilities and experience based knowledge of TNCs in managing large scale projects in China have enabled their local partners to acquire knowledge of, and adapt to, international standards and processes, including feasibility studies, project planning, migrant relocation, environmental protection, transparent bidding procedure and efficient project management.