COUNTRY RISK AND THE INTERNATIONAL FLOWS OF TECHNOLOGY: EVIDENCE FROM THE CHEMICAL INDUSTRY

We empirically investigate the relationship between country risk and the international flows of technology. Using a comprehensive database on investments in chemical plants during the period 1981- 1991, we show that higher levels of country risk are associated with fewer technology transfers to recipient economies. This holds true both for wholly owned operations and for more market-based transactions. The analysis also suggests that technology transfers with smaller resource commitment tend to be preferred in country with higher levels of risk. Hence, higher country risk not only does it reduce the amount of wholly owned investment, it also contributes to shift from this type of technology transfer to more market-mediated means, such as licensing. After controlling for several country characteristics, we do not find intellectual property rights protection playing a significant role in fostering technology transfers or conditioning the transfer mode.