The dual role of local sites in assisting firms with developing technological capabilities: Evidence from China

As strong local knowledge bases emerge in some developing countries and regions, more research efforts are devoted to examine the role of local sites in technological-capability development of firms from developing countries. However, most of these studies illuminate the direct input (e.g., knowledge, human capital) and the role of motivating multinational companies (MNCs) to upgrade their local operations in developing countries so as to perform more innovation activities. Few articles are presented that examine the role of local sites in the learning and technological-capability building processes that take place during technology import activities. This study investigates how local sites in developing countries help their firms benefit from the spillovers of international technology diffusion, by empirically scrutinizing Chinese licensee firms. The empirical results support the hypothesis that Chinese local sites assist with their firms’ technological-capacity building, driven by international technology licensing-in activities, in three indirect ways. That is, the enrollments of sufficient R&D personnel from local sites, the collaborations with local universities and research institutes, and the collaborations with local industrial community firms positively influence the relationship between firms’ international inward technology licensing and technological capabilities.