<h4>Purpose and Method </h4><p>This study aimed to provide an evaluation of the contributions made by foreign multinationals (foreign MNCs) to the Australian economy. Foreign MNCs include firms that integrate research, production and distribution across at least two countries but are headquartered outside Australia, as well as "multi-domestic firms" where the Australian subsidiary is simply a sales/marketing outlet controlled by head office. </p><p>The study was conducted during the first half of 2001 and was based on interviews with 30 foreign MNCs and a written survey of 56 smaller suppliers who had both foreign MNC and Australian customers. The key dimensions which were selected for examination were:</p><ul><li>The value chain, comprising suppliers, customers, and research and development (R&D).</li><li>Clustering and local integration.<strong> </strong></li><li>Strategic alliances, joint ventures, mergers and acquisitions (M&As). </li><li>Knowledge networks and global knowledge management. </li><li>Decision-making and reporting within MNCs </li><li>E-commerce. </li></ul><h4>Impact of Foreign Firms </h4><p>Overall, we argue that the impacts of MNCs are positive, but there are a number of negative impacts. In summary, the negative impacts are as follows:</p><ul><li>Many sales and marketing MNCs have limited links to Australian firms and a restricted impact beyond direct employment and investment in infrastructure.</li><li>There may be limited R&D and limited links with institutions in the national innovation system.</li><li>Many MNC respondents were reducing manufacturing capacity and had restricted clustering with suppliers. </li></ul>There are some areas where the impacts are not clear. These include: <ul><li>Strategic alliances, restricted by low levels of R&D and limited manufacturing in most sectors. </li><li>The impact of e-commerce on relationships with suppliers and customers. At present MNCs' focus is on finding the right business model and on domestic experimentation with e-commerce projects.</li></ul>There are positive impacts gained from MNCs that have a significant role in product and service development at regional or global level. In summary there are: <ul><li>Benefits in employment and exports from significant RHQs, although these benefits may not persist in the longer term.</li><li>Significant and long term benefit through centres of excellence. These are integral to the global success of the foreign MNC. They require substantial investment and, once established, may be less subject to arbitrary decisions regarding their location. They may also have greater links with the national innovation system and may link Australia's research groups with global expertise. These links may in turn help the foreign subsidiary bid for further regional or global mandates.</li><li>Benefits also accrue when the foreign MNC has sufficient access to internal knowledge flows, especially if they performed R&D in Australia.</li><li>Transfer of knowledge and expertise from foreign MNCs to Australian suppliers. </li><li>Training and skill development for Australian staff of MNCs, through international transfers and formal training programs.</li><li>Testing of new products and services in Australia, providing opportunities for Australian suppliers to increase their technical capacity ahead of roll-out of these systems across the firm globally.</li></ul><p>MNCs that had a regional or global mandate were much more likely to export, work with customers, transfer technology to customers and be in control of product development than local mandate firms. Thus, they are likely to have a greater positive impact on the economy as a whole.</p><h4>Implications </h4><p>It is crucial for Australia to access new technologies and management know-how in order to be internationally competitive. A "go-it-alone" strategy is not an option if Australians are to maintain their current high standard of living. The main implications are:</p><ul><li>Australia must refocus investment attraction in order to increase the size and depth of knowledge-intensive MNC activities. Policy should favour centres of excellence. The key sectors where a focused effort may provide dividends include ICT, pharmaceuticals/ biotechnology, food, education and health.</li><li>Australia must promote a dual business culture to enhance its international competitiveness and promote itself as a site for testing new products and services;</li><li>Australia should focus on expanding the number and significance of MNC centres of excellence, rather than on attracting RHQs. The Federal and State governments should also support Australian-based CEOs wishing to expand the range of products and services of their Australian operations.</li><li>Australia should draw on MNCs for new skills and competencies and make it more attractive for expatriates to help to build Australian firms, by learning from the experience of other countries that have targeted the skills, personal networks and capital of their nationals located overseas</li><li>Australia should capitalise on MNCs as demanding customers and standard setters. Australian suppliers must aggressively seek MNCs as customers, even though the short-term costs of product and service certification may be high. These developments can be mediated through the firms themselves, through industry associations or through MNCs seeking to build supplier competencies.</li></ul>

2007-10-17T16:05:13+08:00

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true

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Friend or Foe? Leveraging Foreign Multinationals in the Australian Economy

2002-01-16T12:00:00+08:00

<p style="margin: 0cm 0cm 10pt" class="MsoNormal">To what degree do multinationals influence, either positively or negatively, the growth, capacity and skills of Australian firms?<span>  </span>This study found that multinationals are more friend than foe but that the relationship is fragile and firms and policy makers need to be smarter about engaging with them to maximise the benefits of access to global knowledge, skills and markets.<span>  </span></p><p style="margin: 0cm 0cm 10pt" class="MsoNormal">By being demanding customers, multinationals contribute to better quality products and services which are more sought after in global markets.<span>  </span>If firms and policy makers can encourage multinationals to set down deeper roots in research, innovation and product development here, Australian firms can continue to capitalise on skills and knowledge transfer for their own gain, and this investment will act as a magnet for further investment to encourage more sustainable relationships with multinational firms.</p>

<h5>1 Executive Summary </h5><h5>2 Context and Methodology </h5><ul>2.1 Introduction <br />2.2 Background <br />2.3 Why Foreign MNCs Are Important to Australia <br />2.4 Methodology <br />2.5 Limitations and Strengths of Study </ul><h5>3 Approaches to Measuring Host Economy Integration </h5><ul>3.1 Introduction <br />3.2 Value chain <br />3.3 Clustering and Local Integration <br />3.4 Strategic Alliances, Joint Ventures, Mergers and Acquisitions <br />3.5 Knowledge Networks and Global Knowledge Management <br />3.6 Decision-making and Reporting Within MNCs <br />3.7 The Impact of E-commerce <br />3.8 A Model for Measuring Integration </ul><h5>4 An Overview of Foreign MNCs in Australia </h5><ul>4.1 Introduction <br />4.2 Australia Has More Foreign Investment Inflows than Outflows <br />4.3 Net Inflows Create Jobs <br />4.4 US and UK Dominate as Sources of FDI <br />4.5 Service Sectors are Increasing in Importance <br />4.6 We Know Little About Relationships in the Value Chain <br />4.7 Reasons for Clustering are Unknown <br />4.8 Australia Has a Role in Global Alliances <br />4.9 Acquisitions Appear to Be Major Entry Mode <br />4.10 Foreign MNCs May Be Excluded from Global Knowledge Networks <br />4.11 Internal Competition within MNCs Influences Local Activities <br />4.12 E-Commerce Impacts on Relationships Between MNCs and SMEs is Unknown <br />4.13 Conclusions </ul><h5>5 Impact of Foreign Firms </h5><ul>5.1 Contribution To Building Australia's Capabilities And Critical Mass <br />5.2 Contribution To Australia's Global Reach <br />5.3 Contributions To Skills and Knowledge <br />5.4 Balance of Positive and Negative Impacts <br />5.5 Conclusions </ul><h5>6 Implications</h5><blockquote><p>6.1 Role of MNCs in the global and Australian economy <br />6.2 Refocus Investment Attraction <br />6.3 Leverage Australia's Business Culture Strengths <br />6.4 Create Regional and Global Centres of Excellence <br />6.5 Draw on MNCs for New Skills and Competencies <br />6.6 Capitalise on MNCs as Demanding Customers and Standard Setters <br />6.7 Conclusions <br />7 References </p></blockquote><h5>8 Appendices </h5>

2008-07-11T12:30:15+08:00

<p>The study is divided into three parts, </p><ul><li><strong>Part One</strong> is a literature review which canvasses alternative intellectual approaches to economic development, based on innovation and knowledge as the drivers of growth.</li><li><strong>Part Two</strong> assesses the shape, structure and dynamics of Australian industry against the factors associated with the "learning" economy, particularly innovation capacity, business linkages, management depth, use and transfer of technology and workforce skills.</li><li><strong>Part Three</strong> draws on the findings of the earlier parts and indicates some directions for public policy which all concerned with economic growth in Australia should urgently consider.</li></ul><p>The study draws heavily on the work of the OECD on innovation-based approaches to economic development. The theoretical roots of this report lie in New Growth Theories, Strategic Trade theory and evolutionary economics.</p><p>The short-hand term we use is the "knowledge" or "learning economy", the features of which are an emphasis on the use and dissemination of information and technological progress as the basis for innovation, competitiveness and growth. The critical factor is a nation's ability to innovate and to do so on a continuing basis.</p><p>The research finds that economic success in the future is more likely with a pattern of economic activity and an industry structure that maximises innovation, learning, knowledge creation and dissemination. Firms in these economies are less obsessed with scale and cost, and more concerned about non-price competitive advantage gained from creative uses of information, technology, strategic linkages and skills.</p><p>Consequently, the policy challenge is to ensure that what we make and what we trade as a nation is well-represented in economic activity that is high return, knowledge intensive, high growth and globally competitive.</p><p>Part Two details a new way of looking at Australia's capability and performance, with particular regard to,<br />Industry Shares, Concentration and Linkages</p><ul><li>Skills, Employment and Wages</li><li>Innovation Performance</li><li>Trade Patterns</li></ul><p><strong>A selection of the main findings follow:</strong></p><ul><li>Australia's manufacturing sector has contracted in relative terms at the fastest rate across the OECD economies and it seems Australian manufacturing is in general not gaining employment in industries with higher R&D intensities, contrary to OECD trends.</li><li>The linkages within and between industries in our economy are shrinking, a trend inconsistent with the characteristics of an innovative, learning economy.</li><li>There appears to have been little net increase in value-adding to our natural resources since the mid 1970s.</li><li>Many of Australia's industries are increasingly concentrated, with already 0.4% of businesses employing nearly 40% of all workers. The position of SME's versus large firms is likely to deteriorate in the absence of greater networking and use of cooperative arrangements, and wages and working conditions in SME's are likely to come under increasing pressure.</li><li>Australian business R&D expenditure is below OECD averages but has grown faster than the OECD countries since the introduction of the 150% tax concession. Most R&D take up has been in the medium-low and low-tech sectors of manufacturing. Australia's services sector R&D rates highest in the OECD.</li><li>Australia's overall internationally poor R&D performance is largely the result of our industrial structure which is concentrated in low-tech industries.</li><li>Manufacturing has been measured as one of the most innovative sectors of the economy. Innovative firms tend to show better performance in sales and export growth.</li><li>Australia's trade structure has serious built-in negative biases, like our poor and deteriorating terms of trade, costs of investment in productive equipment imports, etc. </li></ul><p><strong>There are 10 policy pathways for Australia if we wish to take the high road not the low road. These are:-</strong></p><ul><li>Acknowledge the importance of the structure of the Australian economy. </li><li>Integrate trade and industry policies. </li><li>Shift the economy towards greater knowledge and innovation intensity. </li><li>Improve cooperation and linkages. </li><li>Target key productivity drivers. </li><li>Ensure programs are performance-based. </li><li>Build global distribution channels and capability. </li><li>Invest in education and research infrastructure and training. </li><li>Focus public policy and private sector attention on innovation and knowledge as the bases of competition. </li><li>Deal with real industries and their dynamics.</li></ul>

2007-10-17T17:50:22+08:00

102

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The High Road or the Low Road: Alternatives for Australia's Future

1997-08-16T12:00:00+08:00

<h3>SUMMARY REPORT: Table of Contents</h3><p><strong>Background<br />Introduction</strong></p><h4>Part One: Economic Growth in Modern Western Economies</h4><p><strong>Theoretical Background</strong></p><ul><li><div>The Neoclassical Approach</div></li><li><div>The Evolutionary Approach</div></li></ul><p><strong>The New Economy</strong></p><ul><li><div>Learning Economies</div></li><li><div>Learning Firms</div></li><li><div>Networking</div></li><li><div>National Innovation Systems</div></li><li><div>The Importance of Industrial and Trade Structures</div></li><li><div>Summary of the Main Points From the Literature</div></li></ul><p><strong>The Importance of Industrial and Trade Structures<br />Summary of the Main Points From the Literature</strong></p><h4>Part Two: Australia in a High Tech World</h4><p><strong>Australia's Industrial Composition and Linkages</strong><br />The Role of Manufacturing<br />Industry Concentration<br />Cooperation and Networking<br />Industrial Structure and Input-Output data<br /><strong>Human Capital: Skills, Wages and Employment</strong><br />Management Skills<br />Scientists and Engineers<br />Trainaing<br />Employment and Wage Trends<br /><strong>Australian Industry Innovation</strong><br />R&D Expenditure<br />Other Innovation Measures<br /><strong>Productivitiy Growth<br />Australia's Trade Patterns<br />Summary of Australia's ProblemsPart Three: The Way Forward</strong></p><p><strong>Path One:</strong> Acknowledge the importnace of the structure of the Australian Economy<br /><strong>Path Two:</strong> Integrate trade and Industry policies<br /><strong>Path Three:</strong> Shift the economy towards greater knowledge and innovation intensity<br /><strong>Path Four:</strong> Improve the operation of business networks<br /><strong>Path Five: </strong>Target key productivity drivers<br /><strong>Path Six:</strong> Ensure programs are performance-based<br /><strong>Path Seven: </strong>Build global distribution channels<br /><strong>Path Eight:</strong> Invest in education and research infrastructure and training<br /><strong>Path Nine:</strong> Focus attention on innovation and knowledge as the bases of competition<br /><strong>Path Ten:</strong> Seal with real industries and their dynamics<br /><strong>Concluding Remarks</strong></p><p><strong>Figures and Tables</strong></p><p><strong>Figure 1</strong> Percentage Change in Manufacturing Share of GDP, Various OECD Countries, 1970-90<br /><strong>Figure 2</strong> Industry Employment Growth 1985-95 v. Industry Innovation Propensity<br /><strong>Figure 3</strong> Industry Employment Growth 1985-95 v. Industry Wage Rate<br /><strong>Figure 4</strong> Industry Employment Growth 1985-95 v. Industry Training Commitment<br /><strong>Figure 5</strong> Industry Employment Growth 1985-95 v. Industry Productivity<br /><strong>Figure 6</strong> Australian Business R&D as % GDP<br /><strong>Figure 7</strong> Australian Machinery & Equipment Investment as % GDP<br /><strong>Figure 8</strong> Change in Equipment Capital Stock* per Worker 1965-90<br /><strong>Figure 9</strong> Non-Manufactures Trade Surplus v. Manufactures Trade Deficit % GDP<br /><strong>Figure 10</strong> Australian Manufacturing Trade Balance by Knowledge Intensity (% GDP)<br /><strong>Figure 11 </strong>Manufactures Trade Deficit by Technology Classification Various OECD Countries, % GDP, 1992</p><p>Table 1 Growth in Australian Employment by Beoad Occupational Group, 1986-96</p><h3>FULL REPORT: Table of Contents</h3><h4>Part One Dynamics and Capabilities of Modern Western Economies</h4><p><strong>Introduction</strong><br /><strong>Chapter One: Summary of Traditional Approaches To Economic Growth and Trade</strong></p><ol><li><div>The Traditional Growth Model</div></li><li><div>Problems with the Traditional Model</div></li><li><div>New Neoclassical Growth Theories</div></li><li><div>Implications of the New Growth Theories for Public Policy</div></li><li><div>Limitations to New Growth Theory Approaches</div></li><li><div>Classical & Neoclassical Theories of Trade</div></li><li><div>Problems with the Standard Trade Models</div></li><li><div>Strategic Trade Theory</div></li><li><div>Conclusions</div></li></ol><p><strong>Chapter Two: Innovation-Based Approaches to Industrial Development</strong></p><ol><li><div>Background</div></li><li><div>Evolutionary Analysis</div></li><li><div>Models of the Innovation Process</div></li><li><div>Conclusions</div></li></ol><p><strong>Chapter Three: Knowledge Generation, Diffusions and Use</strong></p><ol><li><div>Background</div></li><li><div>Networked Nations</div></li><li><div>The Generators of Innovation: Firms & their National Support Systems</div></li><li><div>Path Dependence, Cumulative Change & Industrial Structure</div></li><li><div>Conclusions</div></li></ol><p><strong>Chapter Four: The Learning Economy</strong></p><ol><li><div>Background</div></li><li><div>Knowledge & Learning</div></li><li><div>Complementary Assets</div></li><li><div>Learning & Management</div></li><li><div>Knowledge Distribution Power</div></li><li><div>Technological Infrastructure</div></li><li><div>Conclusions</div></li></ol><p><strong>Chapter Five: Internationalisation & Human Resources</strong></p><ol><li><div>Trade Liberalisation and the Learning Economy</div></li><li><div>Human Resources: Knowledge, Employment & Wages</div></li><li><div>Conclusions</div></li></ol><p><strong>Chapter Six: Conclusions: Industrial Structure & the Learning Economy</strong></p><ol><li><div>The National Level</div></li><li><div>The Industry Level</div></li><li><div>The Firm Level</div></li><li><div>Moving to a New Economic System</div></li><li><div>Where to Next?</div></li></ol><h4>Part Two Australia in a High Tech World</h4><p><strong>Introduction</strong><br /><strong>Chapter Seven: The Industrial Structure of the Australian Economy</strong></p><ol><li><div>Industry Shares</div></li><li><div>Employment Shares</div></li><li><div>Cooperative Business Linkages</div></li><li><div>User-Producer Relations</div></li><li><div>Industry Concentration</div></li><li><div>Conclusions</div></li></ol><p><strong>Chapter Eight: Human Resources: Skills, Employment & Wages</strong></p><ol><li><div>Management Skills</div></li><li><div>Science Skills</div></li><li><div>Employee Skills, Wages & Employment</div></li><li><div>Conclusions</div></li></ol><p><strong>Chapter Nine: Australian Industry Innovation</strong></p><ol><li><div>Business Research & Development</div></li><li><div>Other Measures of Innovation</div></li><li><div>Innovation and Firm Performance</div></li><li><div>Australian Innovation Compared</div></li><li><div>Australian Productivity Growth</div></li><li><div>Machinery & Equipment Investment</div></li><li><div>Infrastructure</div></li><li><div>Human Resources Management Programs</div></li><li><div>Conclusions</div></li></ol><p><strong>Chapter Ten: Australia's Trade Patterns</strong></p><ol><li><div>Trade and the Learning Economy</div></li><li><div>Australia's Trade Patterns Described</div></li><li><div>Australia's Trade Patterns in a 'Learning Economy' Context</div></li><li><div>Conclusions</div></li></ol><h4>Part Three The Way Forward</h4><p><strong>Chapter Eleven: Policies and Pathways</strong><br /><strong>Pathway One:</strong> Acknowledge the importance of the structure of the Australian economy<br /><strong>Pathway Two:</strong> Integrate trade and industry policies<br /><strong>Pathway Three:</strong> Shift the economy towards greater knowledge and innovation intensity<br /><strong>Pathway Four:</strong> Improve cooperation and linkages<br /><strong>Pathway Five:</strong> Target key productivity drivers<br /><strong>Pathway Six:</strong> Ensure programs are performance based<br /><strong>Pathway Seven:</strong> Build global distribution channels and capability<br /><strong>Pathway Eight:</strong> Invest in education and research infrastructure and training<br /><strong>Pathway Nine:</strong> Focus public and private sector attention on innovation and knowledge as the bases of competition<br /><strong>Pathway Ten:</strong> Deal with real industries and their dynamics</p>

2007-10-29T17:56:13+09:00