Technology and Industrial Exports
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United Nations Int er-Ameri can Development Bank Economic Commission for Latin America Buenos Aires Office IDB/ECLA Research Programme in Science and Technology Working paper N°2 TECHNOLOGY AND INDUSTRIAL EXPORTS A MICRO-ECONOMIC ANALYSIS OF ARGENTINA'S RECENT EXPERIENCE Jorge Katz Eduardo Ablin Distr. RESTRICTED BID/CEPAL/BA/3^ August 1978 780704 ORIGINAL: SPANISH Jorge Katz is the Director of the IBD/ECLA Program on Research in Science and Technology. Eduardo Ablin is employed by the Secretaria de Estado de Comercio Exterior y Negociaciones Económicas Internacionales, Argentina. The authors are grateful for the comments made on a prelimin- ary version of this paper by Hoque Carranza, Adolfo Canitrot, Juan Carlos de Pablo, Michael Anderson and Rafael Iniesta. The opinions expressed here are personal in nature and do not necessarily reflect those of the institutions mentioned. ECLA Office in Buenos Aires Cerrito 264 - 59 Piso 1010 - Buenos Aires - Argentina CONTENTS Chapter Page X o XnifTOdtlCiîl.Ona • dee»«*eoe«oo9oQooo»o«o«««««««*«e**««»»*** 1 ÏÏ. Industrial Exportas Current Explanations and a Complementary Hypothesis* 7 Hypothesis of ïhis Paper« « <, „ . 8 Syntrll66 ÎS eeoe@ooo0«oaoQOoeaoeo*«eQo o « o • « • 12 III. Volume and Structure of the Flow of Exports of "Relatively Sophisticated" Industrial Products 13 IV. Export Behaviour at Company Level 21 1. Characteristics of the Sample 21 2 o Results Obtained in the Field Study.«,. 23 V, Export Behaviours A Descriptive Summary 31 VI. Conclusions and Lines for Further Research. 45 TABLES Table 1. Argentine Exports„ 2. Growth of "Relatively Sophisticated" Industrial EXpOirlfS eoo«oeo90oooooeo«oooe • •••••••• 15 3„ Growth of Relatively Sophisticated Industrial Exports According to Chapter of the NADE Nomenclature 17 4„ Percentage Share toy Chapters of Industrial Exports 1969""1974 o0*»a*«*oe»o*oeo<}oo»oo*00«Gfte*«>ee696»««e**e«*« lB 5» Percentage Share by Chapters of Industrial Exports 19 6. Industrial Exports Which Reflect Highest Rates of Growth ç X 969""19T4 ©»©©ooeooooeeoooseo»»®®®»®»»*«*»««»«»« 20 7» Companies Which Make Up the Company Sample of Biggest Exporters in 8. Accumulated Exports According to Nationality of the Comp&îl^ç X^^S^X^T^O O©OOO®OOOOO®O«©OOOOOO®»»OO®««»»O0«»# 22 - i « Page 9. Export Performance of the 20 CSoflipani@@ Shorn in Table 8f 1969—1974 24 10. Total Exports Per Year, 1969-1974 26 11. Division of the Sample into Industrial Sectors 1969-1974 27 APPEHDXX I Table 1/1. Percentage of Exports Per Chapter of HAD! Covered by the Companies 57 1/2. Exports to LAPTA and the Best of the World, 1969-1974.. 58 < 1/3. Export-Markets £er Company 59 1/4. Exports of Finished Products and Semi-finished Products or Parts, 1960-1974 61 1/5. Products Exported by the 20 Companies Analysed 62 - ii - I. XBSSOBOOSXOS ot trai© Mas fornd it difficult, eine« "XteoatlQff'e pamd©^ fl&d alternative explaaatioas to Oblia'a model, baaod m the relativo soiM^t et faotors ©f prodigi ©¡a, la fa@t9 sia©® &®<s@ti@££ th&t the àmtrieaa export iadwsr&ries were 1©©© oapital iate&siv® thaa those «hleh oompeted with importa, tho Gioplistio te© faetor model faood im- portaat diffissiti®®. 2/. Por thi® raasea» th@ Mtosmtw© ©f the last decade hae tri ed to explore nm ®ays o£ d@v@lopia§ th© roeeived eaalytlo&l frama- work. Wq §>bm®rw® 9 oa the th® attempte to recreate the neoclassico! model bj iaoorporatiag Da©o-fact©rs® ©f production » sueh as teote©!®®^ rmms^h oM d@v<slepmeat ©sp©MitmM9 leara« iag8 ®tee ¿A By broaàeaìas the sp ostrica ©f fectors it la ia- teadad to that tho "error® dooo i@t li® la th© theoretioal oonooptioa? totat ia it© siepiifi©é te® faetor vwsitae th© ©tfa®^ àaaiti, a s©e@ai tsdas te e@aa©@t the aaaljsie @f oSmt© ulte tM© ot dir®@t foreiga ES3 2/ W0 L©©mti©ffp ®P©©tor Pr©p©rt£©as sai the Straotara ©f Amari essa trofie» Fwrthor Sheoretle&l aaS Ssplrieal An&lygie" , ®f ggwsaisg mi Sfortloftica« 1956, 2/ Hmften®r attuali? atteltat®© t® Ofelia the forsralation ot a. nsb m^m ©ea-plss stó roaltetie ttes^ tfcoa th© everslBpllfied taro FÌTETAR TOMim te SM®l& le alsmfs eM®« Se® S. C» Kaftea®^ Ssspaet sf Satinai @temet©n®ti©@ è f ©eh&elogy oa th@ CootMMy S©np®@itim ©f ?rade ia , ia SU, ¥®asso®. (eéo), , fffaetor ia lategaat^oaal ffrade. te®, ©f 19709 ®oli7o " X&tcraatioaal Ifrade aad ? 1961? h) R. Ver- le gyoiytM forcina frade. (•ia Oteptsr VII) t saS fooìsaologleal Gfeoages The Voi. 3» 2. investment £/. Both lines of thought are closely linked to the recent develop- ment of the so-called "product cycle" theory, which has attempted to integrate into a more comprehensive framework the part played by both technological progress and the multinational corporation in the contemporary development of international trade Although we consider this integration quite fair - that is, technology and multinational corporations cannot be absent from an analytical framework which succeeds in throwing some light on the subject of international trade - we think that certain characteris- tics of the produot cycle theory require greater attention because of the significance they may have for the export activity of rela- tively less developed countries. In particular we refer to the concept that this theory gives us about the "maturity81 of an in- dustrial product. This is one of the subjects examined in this monograph, in which we study the manufacturing export performance of Argentina in recent years. Together with this country, others in Latin America - especially Braail and Mexico - have shown during the last few years a significant increase in their exports of rela- tively sophisticated industrial products, such as, for example, tractors, cars antibiotics? machine-tools, electromechanical capi- tal equipment, accounting machines, etc. What is more, companies from these countries also appear as incipient exporters of techno- logy and capital» as they figure more and mere frequently as suppliers of complete industrial plants to other countries in the region through "turnkey" contracts, or as capital exporters under- taking programmes of multinational expansion through the opening of subsidiaries in other countries of the continent 6/. y Ch. Kindleberger, The International Corporation, a Sympo- sium, MIT University Press, 1970? and Ameri pan Business Abroad. Yale University Press, 1969. £/ R, Vernon, "International Investment and International Trade in the Product Cycle", Quarterly Journal of Economics. May 1966. 6/ Several Argentine companies have expanded their activities to other Latin American countries, and we have now found more than 30 cases of exports of complete industrial plantes. It is interes- ting to emphasise that, apart from these manufacturing plants, there hav® also been sales of technology and engineering services for the construction of public works and infrastructure. » Z - Even though the product eyeIs theory contains a number of hypotheses which help to explore this field, some of its assump- tions fail to capture the complexity which arises from the actual facts. Thus, for example, the product cycle theory would seem to assume that the semi-durable and capital goods exported by the le© developed countries are completely standardized products. However, many of these products exported by the countries in question in- volve substantially modified versions of the original technologies, a fact also quite evident in the export of complete plants. This leads us to think that the "product cycle19 theory also assumes a steady and quite linear process of knowledge transference from countries with high levels of expenditure on research and develop- ment activities to the more backward countries. Perhaps it would be more correct to visualize a number of "relative cycles" related to the structural capacity of a given country to absorb, %adopt', and * improve' foreign knowledge, which in turn would be connected with its human resources and the complexity of the industrializa- tion process which it has already undergone. The following are examplesi Companies Which Have Established Subsidiaries COMPAHY AOÏÏIYITY COUNTRY IH WHICH ESTABLISHED Siam di Telia Elee tromechanical Brazil Roque Vassalli Agricultural Machinery Brazil Industrias Siderúr- Ferro-alloys Brazil gicas Grassi Rosati & Cristofaro letal Structures Venezuela Laboratorios Bagó Pharmaceutical Products Peru Aurora Electronic Lighters Brazil & Spain Companies Which Have Sold Complete Plants TYPS OF PLANT SOLD COUNTRY SEI Ingeniería Self-contained Meatpack- Cuba ing House and Freezing Plant Eximparg S.A. Cottonseed Oil Plant Bolivia Astilleros Shipyard Cuba Vicente Porte Argentai S.A. Self-contained Bakery Cuba Benito Roggio & Hijos Airport Paraguay Meitar S.A. Plant for Citric Juices Cuba Concentrates and Jams - 3 - In the same way as in the classic models, in which innovation and technological leadership giv® comparative advantages in inter- national trade, in this study also technological change takes on a crucial role» In this case, however, we emphasise not the "major" technological changes which characterise the classic theory of innovation^ but the accumulated flow of "minor" innovations arising from those scientific and technical activities which will be here- by called "adaptive" inventive activity. It will be argued later on in this paper that such scientific and technical activities are closely linked to the growth path of efficiency and overall factor productivity growth of any specific industrial firm and may lead to a dynamic change in its comparative advantages on the international scenario. The classic economists recognised that technological leader- ship and innovation gave comparative advantages in international trad®. In fact, they reoo&iized the existence of different pro» duction functions which formed the basis for the existence of coa* parative advantages. Contrary to that, the neoclassical theory of international trade rests on static assumptions, the trade flow being attributed to differences in the relative availability of factors considered to be units of non-differentiated labour acoumu» lation of homogeneous capital, and given natural resources.