A research study submitted in partial fulfillment of the requirement for the degree of Master of Business Administration, School of Management

Research Studies Project Report (M.B.A.) - Asian Institute of Technology, 2001

In last few years, there has been a significant upsurge in internationalization of production activities of MNCs through foreign direct investment. This massive internationalization has increased the involvement of MNCs in production activities of the host countries both in quantitative and qualitative terms. It is widely claimed that the subsidiaries are now enjoying more autonomy in decision making, undertaking higher degree of R&D, receiving greater amount of technology and transforming themselves into more integrated production units over time. The present study aims at investigating the validity of above propositions. More precisely, the study is envisaged to assess the impact of FDI on technology transfer, R&D activities, and technological capability building of the host economy. The electrical appliance industry of Thailand has been taken into account for measuring this influence. The study found that the parent companies have transfetTed knowledge and info1mation to the local subsidiary to develop skills and abilities that are barely sufficient to run the operation of plant. The skills and abilities of the local people are confined only to production and operation level and up to lower level of complexity. The parent companies did not pay any attention to develop skills and abilities of the local people for undertaking innovative and R&D activities. So these units are not fully integrated production units, rather truncated in nature, where some important elements of the production system are missing.