Exploring Manufacturing Firms’ Absorption Capacity of Imported Technology in Pakistan

Abstract

In existing literature there is a general consensus that the only effective and compelling approach for developing countries to enhance the capacity of their production units is by exposure to foreign technology. However, literature on the subject has outlined some conditions necessary to reap the potential gains of imported technology in their production process. For instance, it endorses that a country's potential gain of imported technology revolves around the capacity of the production units of country to observe and capably utilize imported technology in their production process. In this context, this study aims to explore how Pakistan's manufacturing firms incorporate imported technology in its production process. To meet the objective of the study, we collected data from 86 large scale manufacturing firms across the country to quantify the absorption capacity of manufacturing firms. The evidence seen from the field survey shows that, on average, 60% of the workers are technical workers, which is a good sign. Regarding the awareness of firms towards R&D the responses were surprising, as few firms were focusing on this critical component and most of the entrepreneurs are reluctant to invest in the R&D sector.Contribution/Originality: This paper contributes to existing literature on the subject in two different ways.First, as far as the case of Pakistan is concerned, no such study has been carried out to measure and investigate the absorptive capacity of manufacturing firms. Second, unlike previous studies, this study used two diverse approaches to quantity the absorptive capacity and examines the subject more thoroughly. The paper found that 60% of the large scale manufacturing firms in Pakistan showed an improved absorption capacity by employing greater number of technical workers. However, the major constraint to introduce efficient imported technologies in manufacturing is the entrepreneurs' reluctance to invest in the R&D, which limits their absorption capacity. This is an aspect that need special attention from the policy makers.

Analyzing the China-Pakistan Free Trade Agreement: Implications and Lessons for Pakistan's Future Free Trade Agreements

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