The global strategy of transnational corporations undeniably generates technological dependence in the host country. For one thing, national firms cannot match the global research and development of a transnational corporation. While transnational corporation research and development activities are highly centralized in the parent company, any local activities in affiliates are mostly limited to adapting the final product to consumer preferences and do not lead to any substantial innovation. In addition, when transnational corporations expand abroad through acquisitions or take-overs, the research and development activities of the acquired local firms are either integrated into the global system or totally discontinued.
While transnational corporations play an essential role in disseminating and diffusing technological knowledge world-wide, their general unwillingness to licence technology to third parties results in a large percentage of their technology sales consisting of internal trade between parent companies and foreign subsidiaries. In addition, the available evidence strongly suggests that transnational corporation parent companies get more royalty payments for low-technology industries, and that relatively little new technology is transferred from parent companies to their foreign affiliates. The actual host country cost of internal transnational corporation technology transfers is considerably higher than that recorded in payments of royalties for knowledge and trademarks and financial charges for technical assistance. Recorded payments do not include the considerable indirect cost to affiliates (and thus to their host country) which may not be immediately apparent under the elaborate internal accounting procedures practised by most transnational corporations. Also, there may be additional costs due to restrictions upon the use of this imported technology, dictated by the global interests of the transnational corporation parent.
In their strategy of product differentiation, most transnational corporations appear to devote more resources to lesser innovations used in the manufacture of new products than to search for new production processes. Furthermore, transnational corporations concentrate on consumption-oriented, rather than production-oriented, technology in developing countries.
Transnational corporations have heavy interests in several new areas of technological development, including microcomputers, robotics, fibre optics and ceramics, and the near-horizon fields of genetic engineering and superconductivity.
Technology transfers within transnational corporations that tend to standardize production, management and marketing techniques generally reflect the patterns of the highly advanced countries, endanger the research and development activities of local enterprises, and run counter to developing countries' attempts to develop technologies more 'appropriate' to their own needs and their factor endowment. Not only have research and development expenditures in transnational corporations been unevenly distributed between parent and affiliates, but worse, foreign affiliates often have to finance new products and processes without deriving any benefit from them, since transnational corporations prefer to exploit their product advantage by exporting rather than by transferring their latest technologies to affiliates.