Exports and Technological Capabilities: a Study of Foreign and Local Firms in the Electronics Industry in Malaysia, Philippines and Thailand

This paper seeks to compare the export and technological capabilities generated by foreign and local electronics firms in Malaysia, Philippines and Thailand, and to explain their determinants. FDI has been the key driver of electronics exports in all three economies. While the data available prevented an assessment of the role of FDI in technology diffusion to local firms, it was sufficient to establish capabilities developed within them. Apart from Philippines, foreign firms generally produced higher human resource and process technology capabilities in Malaysia and Thailand. Although foreign firms were generally endowed with higher R&D capabilities (mainly process technology related) in Malaysia and Thailand, their participation strength was extremely low. Statistically only process technology (directly) and human resource and R&D capabilities (indirectly through link with process technology) was linked with exports. With the exception of process technology, union affiliation and high tech infrastructure, R&D capability enjoyed little relationship with the other variables. Foreign ownership was strongly correlated with exports, but its statistical link with process technology, human resource and R&D capabilities was not significant, which because of the need to use cutting edge process technology to export. Firms – irrespective of ownership enjoy similar levels of HRD to participate in export markets. Weak high tech infrastructure seems to have restricted firms participation in high value added activities such as R&D, but sufficient network cohesion in export processing zones have facilitated expansion in low value added exports.