The Impact of Technology Transfer through Foreign Direct Investment in Developing Nations: A Case Study in the United Arab Emirates

Abstract

Foreign investments have evolved over the past two decades to become the most critical business strategies for many companies. While developed countries have been the originators of more than 86% of foreign investment outflows, they receive only 65% of foreign inflows. By contrast, inward investments for developing countries have risen from 28% in 1990 to 53% in 2012. This increase is the result of a growing perception among recipients that attracting FDI to their nations contributes to technology transfer, which enhances human capital formation, leading to reduced income inequality and sustainable economic growth. Therefore, the purpose of this paper is to examine the aforementioned perceptions in the United Arab Emirates (UAE), a developing nation. The study is based on a mail survey of 123 companies, personal interviews with 12 executives, and the review of documents from United Nations Conference on Trade and Development, Annual World Investment, IMF, OECD, UAE Ministry of Economy reports, and several local agencies. The findings indicate that there has been a significant transfer of technology to the UAE, which has had a positive impact on human capital formation. However, evidence of the relationships between technology transfer and income inequality or economic growth is inconclusive.