ABSTRACT

The objective of this paper is to analyze the contribution of FDIs to Innovation and
Industrialization in the BRICS countries. Most of the BRICS countries are developing countries,
except Russia and hence attract a lot of Foreign Direct Investments but a huge percentage of
these FDIs contribute to development of the economy and not to research and development
which actually could in turn contribute to the growth of the developing nations. This paper tries
to throw light on the policies in the BRICS nations to attract FDIs and to use them for Research
and development and Innovation in the nations.


















INTRODUCTION
Scholars and policy makers alike remain fascinated by the development experiences of a group
of emerging economies Brazil, Russia, India, China and South Africa often referred to as the
BRICS. These economies have a sizeable impact on the global economy. In terms of combined
GDP they are already larger than USA and the European Union. Whereas BRICS only accounted
for less than 4 per cent of world exports during the early 1980s, by 2010 their combined share
reached 13 per cent of world exports. They are regional economic leaders and they are attracting
substantial amounts of foreign direct investment. This makes them interesting and important as
global decision-makers.
Foreign Direct Investment is an important facet of the globalization process. In the mid 2000s,
FDI stock corresponds to approximately 20% of world GDP. In 1982 FDI flows amounted US$
58 billion and in 2007 about US$ 2 trillion. These flows are not homogeneously distributed
around the nations and important changes have been observed in the last 20 years. Up to the
early 1990s, approximately 95% of FDI originated in the developed world (USA, western
Europe and Japan) and were directed to the same region (around 85% of total In the last few
such situation radically changed: in 200, 68.7% of FDI flows went to developing countries and
approximately 16% of world FDI originated in these countries.
There have been other important new trends regarding FDI in the last 20 years. First, rates of
FDI growth since the early 1980s have been more than twice the rate of world investment (using
GFCF as a proxy of investment) which signals the increasing importance of Transnational
Corporations in the world economy. Second, a significant share of such FDI is via mergers and
acquisitions (US$ 112 billion in 1990 and US$ 1,031 billion in 2007), showing that a large part
of new FDI does not generate new production capacity but rather is linked to a process of capital
concentration and is part and parcel of a financial dominated accumulation regime.
The share of BRICS countries in the total inflow of the current world FDI increased to 11% in
2011. The import of FDI in BRICS countries was 2.2 trillion dollars in 2011 (it was increased
5.3 times during the past eleven years). At the same time the import of FDI in Russia was
increased by 14.2 times, in India by 12.3 times. Special attention is paid to the expansion of
scientific researches and the development connected with nanotechnologies. The number of
Russian researchers in the field of nanotechnologies grew by 1,4 times during the period of
2008-2011, the internal costs of carrying out researches of the organizations connected with
nanotechnologies, increased by 2.4 times. In Russia scientific researches and development in
2011 was carried out by 374.8 thousand researchers in 3682 organizations.
Scientific researches and development in 2011 in China was made by 511175 scientists (1.4
times more, than in Russia) from 5941 scientific institutions (1.6 times more, than in Russia).
The biggest share of scientific researchers in China was developed in the field of the electronic
and communication equipment (53.2%), medicine, pharmacology (18.3%) and the medical
equipment (12.5% of researchers). As to the R&D's expenses, Russia is considerably lags behind
China and India.

OBJECTIVES
The objectives of this paper are as follows:
1. To analyze how FDIs contribute in upgrading technology
2. To study if there are policies that support FDIs contribution to Innovation and Research
and Development.
























FDI ASSISTED TECHNOLOGICAL CATCH UP
Technological progress and its diffusion were important for the First Industrial Revolution in
Britain in the 18th century. It was also vital for the (second revolution) industrialization of
Continental Europe and the USA in the 19th century, and for the (third revolution)
industrialization of Japan and the East Asian NIEs in the 20th century. In each case catch up
resulted from lagging countries accessing technology developed in leading nations, adapting it
effectively to local circumstances, and subsequently relying more on indigenous innovation.
Technology has become more important as ever, in the current modular and flexible production
systems that has come to characterize the world economy. Indeed the world is experiencing a
new industrial revolution, lead by networked production, mass customization and new
technologies, such as 3-D printing.
Multinational Enterprises (MNEs) can diffuse technologies to developing countries in three
ways: (i) by directly transferring technology to affiliate or joint ventures (JV); (ii) through
spillover effects , and/or (iii) through doing R&D within a developing country.

The much faster industrialization of China, as compared to that of Europe or the USA, reflects in
part the stage skipping phenomenon, made possible by the country benefitting from the much
more rapid diffusion of technologies by foreign firms and domestic efforts for acquisition of
technology. The catch up country does not have to go through every stage of technological
development. It can immediately jump from relatively backward levels of technology to
relatively advanced levels. In some technological fields, Chinese industrialization involved
leapfrogging, jumping directly from the imitation of mature technologies to innovation at the
global frontier.

For industrially lagging countries the rise of global production sharing has radically changed the
range of industrial policy instruments available and has increased the importance of
complementarities between foreign sources of technology and domestic absorption capabilities.
This is because successful industrial development now requires countries to be competitive not
in the complete production of some good, but in the production only of a component (trade in
tasks) wherein they need exceptional capabilities. Integrating a countrys producers into global
value chains may imply that the traditional focus of industrial policy on lumpy, complex
industry may not be appropriate anymore FDI and MNEs can perhaps better be seen as a two
edged sword in industrialization. The two-edged sword applies to both the technology transfer
and global value chain integrating roles of FDI and MNEs. As far as FDI as a vehicle for
technology transfer is concerned, it is difficult to establish empirically whether and how
important FDI is. It is econometrically difficult to identify the separate impact of FDI on host
country economic performance, including productivity of firms. Among others, this is due to
high correlations between FDI inflows and trade openness, to endogeneity (and reverse
causality) problems, and to omitted variables associated with unobserved country
heterogeneity. Whether or not outward FDI by multinational enterprises is a source of
technology transfer to developing countries is a question that has resulted in a an large empirical
literature. Generally researchers strategy have been to test whether the presence of a MNE in a
developing country or region has increased the productivity of local firms or has had an impact
on factor markets.

There exist in principle two productivity influences one is a direct productivity influence
through for instance joint ventures (JVs), where the partner firm in a developing country directly
benefits from the technological and managerial know-how of its foreign partner. A second
influence is due to externalities whereby domestic firms performance and productivity are
affected either positively or negatively - by the presence of the foreign firm or JV.























FDI in BRICS and NATIONAL POLICIES
FDI has presented a strong tendency of increase in BRICS countries in the 2000s,
boosted by national favorable policies toward FDI. Over such period China had the
highest inflows among all BRICS members. At the peak of its FDI inflows
China, recorded about US$60 billion. This occurred in 2000 and again in 2008.
Over the entire period Brazil was the second highest FDI recipient. This country also
displayed less volatility in inflows than China. Its lowest FDI inflows were in 2003 at
about US$ 10 billion. Russia, on the other hand, shown robust growth in the second
half of the decade. Russia started from a low base of about US$3 billion prior to a
peak of about US$52 billion in 2007. South Africa is at the bottom of the list of BRIC
countries with less than US$10 billion between 1998 and 2007. A breakdown of
average FDI inflows again confirms that Brazil has displayed the least FDI inflows
fluctuations.

In the mid 1990s, deep structural change in the Brazilian economy propelled a FDI
boom the third in its history. The central government played a key role for attracting
FDI, basically through the approval of constitutional amendments that terminated public
monopoly in sectors such as telecommunications and oil and gas and removed earlier
distinction between Brazilian firms of national and of international capital. This recent
FDI by TNCs in Brazil mostly targeted the services sector, particularly the privatized
infrastructure sector (telecommunications and electricity). Also it concentrated in
operations of mergers and acquisitions of local firms. The share of TNC subsidiaries on
overall sales of the 18 most important production chains jumped from 36% in 1996 to
52% in 2000. In the last years (2007, 2008), FDI flow was strongly directed to the
primary sector - oil and natural gas extraction and, specially, metallic minerals
extraction.

In Russia, the expansion of international TNCs to the country is encouraged by its
government which pursues a policy aimed at providing favourable investment climate
and development of investment infrastructure. In order to attract FDI in Russia, the
government implements a set of specific measures, as the Foreign Investment Advisory
Council (FIAC), which main objective is to create attractive investment climate in Russia,
and the federal Law "On Investment Activities in the Form of Capital Investments in the
RF, to provides guaranties of equal rights, protection of interests and property to all
investors regardless of their ownership. As a consequence of these incentives, in the recent

years TNCs have been rapidly increasing their presence in the Russian economy the
FDI flow went from US$ to US$ 93 billion in 2001 to US$ 881 billion in 2008.
However, many Russian economists believe that liberalisation of external economic
activity was implemented without taking into account domestic economic realities.
Foreign TNCs are generally not ready for large-scale investments in modernisation of
major Russian production facilities whose equipment is mostly obsolete.

In India, since the decade of nineties 1990s the policymakers have viewed the FDI
inflows to be a major source of scare capital, which is capable of contributing to capital
formation, output and employment and providing access to technology, managerial
skills and markets. Consequently, FDI has became an important form of external
financing for India. After stagnating for a few years at around US $ 2.5 billion, FDI
inflows rose again to a level of about $ 4.3 billion in 2003, reached nearly US $ 17
billion in 2006-07 and and $ 35.3 billion in 2008-09. These include a large number of
cases of foreign firms acquiring wholly Indian ones. Policymakers in India have made a
shift away from the focus on merely attracting a higher quantity of FDI to targeting a
higher quality of FDI (UNCTAD, 2005). From the mid nineties onwards policymakers
in India even targeted to attract FDI for activities such as research and development
(R&D), design, technical support centre, education and training, etc. FDI in sectors
designated as high technology is receiving preferential treatment in terms of access to
infrastructure, tax incentives and subsidies. The latest policy of FDI promotion
practices, as in Brazil, the principle of no discrimination against foreign firms.

China is a dominant player amongst the BRICS group in terms of its FDI outflows. In
China, on the early stage of reform and opening-up, due to policy restrictions, joint venture
and cooperation ventures were the main forms of foreign investment in China. But with
improvement of Chinas investment environment, an increasing number of foreign
investments have taken the form of solely foreign-funded enterprises. After the middle of
1990s, manufacturing TNCs began to invest in capital-intensive or technology-intensive
areas, and start to emphasize the strategically position of subsidiary companies in China in
the global business integration. However, much of Chinas exports in high-technology fields
still represent shipments of final-stage assembly of electronic products based on components
that are produced in developed countries.

The South African economy is nowadays highly favourable to foreign investors, though
few national documents currently contain specific references to FDI. At the international
level, the country has committed to the majority of international and/or multilateral
agreements relevant to ensure the protection of foreign direct investors and of their
intellectual property. Generally, no discrimination is applied against foreign investors except
in the banking sector. Besides its favourable TNC context, the country also offers a wide
range of incentives to both domestic and foreign direct investors. Nevertheless, South Africa
is still a small FDI recipient, and this inflow appears to be volatile all the African continent
only absorbed 0.7% of world FDI outflows, most from developed countries. Sectorally, FDI
has been concentrated in the primary sector, notably mining. The country is particularly
attractive in this regard, given the large stocks of mineral resources and the variety of mineral
resources on its territory.




























R&D AND THE ROLE OF TRANSNATIONAL CORPORATIONS

In general, all the studies recognize the influence of TNCs on their economies and the
efforts made by their governments in recent decades to stimulate FDI flows. But conclude
that, although some exceptions, the contribution to innovations development has been very
limited.

Brazilians innovation survey (PINTEC) sectoral analysis revealed that, with few
exceptions, R&D/net sales ratio of large local firms (with more than 500 employees) tends to
be higher than the proportion of large TNC subsidiaries; and also that R&D expenditures
over total innovation expenditures of locally owned large firms are bigger than those of
TNC subsidiaries. The authors conclude that the innovative performance of large domestic
enterprises is stronger than the subsidiaries. Comparing the performance of 150 TNCs in
Brazilians affiliates and in the rest of the world (including parent companies), it is also
possible to observe that average technological efforts (R&D/sales) in Brazil was 0.7%, while
in the world it was 5.0% in 2005. This data suggests the technolgical performance of
subsidiaries are comparatively still low. Besides its limited performance, R&D activities of
TNCs in Brazil are very concentrated: almost half (48.6%) of large subsidiaries R&D is
performed by firms of the auto industry alone.

In Russia, nowadays the creation of R&D organisations with TNC participation, except
in very few cases, does not bring to the country any outstanding results in development and
promotion of advanced technologies or products. Foreign-owned companies are considered
even less innovative than Russian ones. However, a relevant level of innovation activity has
been shown by companies jointly owned by Russian and foreign capital, which have been
twice as innovative as other types of companies. The main aspect of local expenditures
which does affect TNCs' innovation activities in Russia is low salaries of highly skilled
professionals. Despite the fact that in 2001-2007 salaries of R&D personnel across all R&D
sectors have increased, they still remain extremely low which makes conducting research
and development in Russia attractive.

Foreign firms also reveal a lower R&D intensity compared to domestic firms in India. The
post-liberalisation period has been characterized by the establishment of centers working
exclusively on the objective of global R&D. This trend has spread to the fields of software
engineering, chip design bio-informatics and agro-biotechnology. Recently, there has been a
significant increase in the number of FDI projects through US companies for design, R&D
and technical support activities for the development of global products. Indians subsidiaries
do not focus on technology absorption. Their focus is largely on the customisation of their
parents technology for the local market. Analysis of the patterns of collaborations and patent
ownership indicates that TNCs are establishing a highly unequal division of labour with the
national S&T system of India. TNCs are using the foreign affiliates for the products under
development for global markets. TNCs are actively using the instrument of ownership of
intellectual property rights to prevent the spillovers from being captured by the domestic
entrepreneurs. So far there have been very few spinoffs from the foreign R&D centres. In
general MNCs use collaboration for later-stage work to avoid possible infringements.
Further, major software firms such as Infosys, Wipro, TCS are under contractual obligations
to transfer the ownership of intellectual property created in the host organization.

At present, China has become an important R&D base for TNCs, specially due to
growing pool of skilled engineers and technicians, to facilitate the reduction of research
expenditure and Chinese governments pressure. In spite of enhancement of this process, the
share of China is small compared to TNCs global R&D investment. Although supportive
R&D was still the mainstream of foreign R&D activities in China, many TNCs have
transferred their innovative R&D facilities to China. Wholly owned affiliates are the main
ownership mode of Foreign R&D centers. Foreign R&D organizations established by
transnational firms are highly concentrated in the information and communication
technology (ICT) industries (including software, telecommunication, semiconductors and
other IT products) but equipment and components, biotechnology and drugs as well as
automotive industries also attract a significant amount of this investment. Beijing and
Shanghai are the preferred locations, but more recently Guangdong, Jiangsu and Tianjin
have appeared on the map of foreign R&D investors.

In South Africa, 48% of subsidiaries of foreign firms performing R&D reported
collaborating with other local firms. Healthcare and aerospace deserve attention in this topic
- aerospace has been developed through large defense budget acquisitions in South Africa
and a long history of telemetry. R&D is concentrated in two main South African
provinces: Gauteng, which incorporates Johannesburg and adjacent Pretoria, has
province with 14%.






IMPACT OF INNOVATION POLICIES ON FDIS
During the pre-globalization phase the obligations and restrictions placed by the
governments in respect of access to market, local content and exports played an
important role in persuading the foreign investors to contribute to the processes of
innovation making, technological transformation and structural change in late
industrializing countries. Although to a lesser extent the importance of this factor is also
confirmed by the experience of BRICS countries, the achievements of Indian success in
pharmaceuticals and Chinese success in telecommunications and electronics shows that
governments of these countries still required a policy space to advance the processes of
technological accumulation at home.

Innovation making for the process of technological upgrading is still contingent on
active efforts being made for technological accumulation by domestic firms and
improving the national systems of innovation through the enhancement of investment in
human resource development, strengthening of the linkages of national level S&T
institutions with domestic firms, protection of the innovation making processes by
maintaining the openings in the institution of intellectual property rights (IPRs) for
indigenous innovation and home market protection. However, today the policy regimes
in developing countries are certainly characterized by the mixes that offer more
advantage to the multinational enterprises (MNEs) as compared to the domestic firms.
Analysis shows that the balance of advantages being offered has varied and is not the
same in all the emerging economies. Achievements and limitations of the technological
upgrading process are now much more dependent on the degree of discipline shown by
the domestic enterprises and the success of a country in the implementation and
coordination of policies of creation of national S&T capacity, development of effective
demand for indigenous innovation and home market protection.

Studies reported in this book on the experience of upgrading of the systems of
innovation in the BRICS countries during the last two to three decades also confirm that
the channel of foreign direct investment (FDI) was not a major international source of
knowledge and technology transfer for at least the sectors that have ultimately proved to
be somewhat dynamic in respect of innovation making and allowed their own domestic
firms to compete with TNCs in a successful manner in the developed countries markets.
Analysis shows that the main burden of competence building had to be largely borne by
the national level S&T institutions. There is also confirmation that the catching up
process had to be also carried out mostly through the investment of domestic
enterprises. Achievements and limitations of the catching up process depended on the
degree of success of a country in the coordinated implementation of policies of creation
of national S&T capacity, development of effective demand for indigenous innovation
and home market protection. Investigations into the experience of BRICS countries also
point out that the governments had to make their domestic enterprises to submit to a
policy of conditional access to foreign sources of knowledge and technology and to
bring the required discipline to recipient firms for the development of national
absorptive capacity.

However, studies also confirm that there is now a greater influence of the third
generation policy regime of FDI promotion in the BRICS countries. This policy regime
allows a very different set of policy mixes that give total freedom to foreign investors to
establish their operations in the domestic space. Foreign investors are allowed to use the
national economic and technological space without being subjected to any kind of
restrictions and obligations. While the balance of advantages being offered to the TNCs
is certainly not the same in all the countries, definitely the new policy mixes offer
greater access to national knowledge base and markets. Today in many countries
foreign subsidiaries receive almost the same treatment as what the domestic enterprises
got in earlier times from the policymakers. Arguably, it has been suggested that changes
in the system of governance of the global economy may have influenced the policies of
FDI promotion in this new direction. Earlier catching-up paths are believed to be no
more open to the countries on account of the new regime of trade and development as
enshrined in the rules of the World Trade Organization (WTO). In many sectors
consequently the efforts of domestic enterprises for the building of national capabilities
have also not been seen as much critical by the governments over the last one decade.

Policymakers have chosen to encourage domestic firms and the S&T organizations to
actively participate in the global production and innovation networks (GPINs). Focus
has been on encouraging domestic firms and S&T organizations to establish close
linkages with foreign firms that choose host locations for the reason of seeking the
supply of cheap talent and advanced skills. Recently as factor seeking investments
originating from the TNCs of US and Europe have moved into knowledge intensive
activities in a big way, this tendency has been consciously allowed to grow in the
emerging economies through the new policy mixes of FDI promotion and supportive
innovation policy measures. Even the policies promoting outward FDI from the BRICS
countries also aim to tap the possibilities that can arise from the outward FDI in respect
of the reverse flows from the host economies to foreign subsidiaries.

Studies reported in this book also cover the results arising out of the policies promoting
outward FDI in the BRICS group of countries. While only a small amount of outward
FDI is being undertaken with the aim to tap the possibilities that arise from the outward
FDI due to the reverse flows from the host economies to TNCs, it seems that the
multinationals of BRICS countries have not been able to realize the impact of reverse
flows from the host locations through even these investments. Since the implications
from investing abroad by TNCs of the BRICS countries are embedded in firms
strategies as well as in policies of states that have problems in their systems of
innovations at both corporate and national level, the gains and liabilities being
accumulated in host economies must be kept in view.

Experience of the BRICS countries is yet to confirm the emergence of too many
spinoffs from the factor seeking investments of those TNCs from Europe and United
States. It appears that finance required for the new start ups and spin offs is still not
available in most of the BRICS countries. Private equity (PE) and venture capital (VC)
firms are not interested to support the processes of innovation making by such firms.
Even in the case of outward foreign direct investment (OFDI), the reverse flows from
the countries of Europe and United States to the economies of BRICS group have not
been possible because the emerging economies multinationals are apparently still
resource short and overstretched and in very few cases their existing established
strategies allowed them to tap into the national systems of host locations for the benefit
of innovation making and technological capability building at home. Most tie ups and
investments are directed towards the objectives of taking over of the production
facilities and establishing the marketing and distribution networks. Processes of
competition faced by TNCs arising out of the BRICS countries are capable of
overstretching and draining them of resources. Consequently there are also now many
examples of takeover of these new BRICS TNCs by TNCs originating from developed
countries.

Although the implications of this experience are slowly making an impact on the
options of policy makers of BRICS countries, but it is also apparent that they are not yet
ready to move to the policy regime in which the innovation policy would be utilized in a
non-neutral manner and positively discriminate the measures of innovation policy in
favour of indigenous innovation. It seems that the logic of achievement of higher
growth rates is still driving the national states of these countries to practice more of the
same pathways of greater integration with the emerging global economy. There is an
uncertainty in respect of the path that they should take to grow in the near future. There
is a lack of clarity regarding the costs and benefits of taking to the new pathways for
growth. Consequently competition in respect of both, inward as well as outward FDI is
still rising in the case of BRICS countries. Most of them measure now the level of
success in competition by the amount of FDI their respective governments are able to
attract in respect of knowledge intensive activities. In most of the BRICS countries
governments are now in competition to attract FDI for activities such as research and
development (R&D), design, development and testing, technical support centre,
education and training, etc. FDI in sectors designated as high technology is receiving
preferential treatment in terms of access to infrastructure, tax incentives and subsidies in
these countries. Governments have become liberal in their approach with regards to
encouraging FDI in the sectors connected with information technology, software
development, biotechnology, pharmaceuticals and so on.

The thrust of new policy mixes includes the introduction of measures providing for a)
stronger protection of intellectual property, preferential access to infrastructure, both
technological & physical, through the formation of special economic zones (SEZs), b)
supply of cheaper R&D services from publicly funded S&T institutions, c) availability
of cheaper talent for scientific and engineering work, d) development of educational
institutions that are capable of offering well trained professionals who are fully familiar
with international management and accounting practices, e) easy access to domestic
market, f) elimination of export and technology transfer obligations, g) removal of
controls over monopolies and restrictive business practices, h) dilution of environmental
controls and so on.

Being aware that TNCs can offer new production facilities, managerial practices and
also technology transfer to host countries, it is necessary that in the new context
policymakers have to formulate the policy mixes of FDI promotion and innovation
policy measures to succeed in the process of building national capabilities. After the
experience of the global financial crisis certainly there is again even a renewal of
interest in dealing with the implications of financial liberalization for the domestic
economies in both developed and developing countries. In the emerging economies
policymakers are engaged in rethinking the policies that were responsible for the
transmission of the impacts of global crisis into their economies. In this context the role
of private equity and venture capital is also required to be reconstituted if we are
keeping in view the specific experiences of transmission of the impacts through the
instruments of finance on innovation in the emerging economies. Solutions to the
problem of how the governments must constitute the mix of policies of FDI promotion
and innovation policy measures need to be evolved keeping in view that the systems of
innovation can have varying mitigation and transformational capacities due to the
existence of their systemic connections with the pathways of growth chosen during the
period of last two decades.

Since the new measures under implementation also belong to the sphere of innovation
policy, in the recent period scholars of innovation have also become quite active to
study the impact of the policy changes for FDI promotion on the national systems of
innovation. In the field of innovation studies, focus is back on the study of contribution
of foreign direct investment (FDI) to the processes of technological change and
innovation making. Policy challenges that developing countries face in respect of
monitoring and evaluation of the impact of interventions being put in place by
governments to deal with the interplay between innovation policy and FDI promotion
have recently come under investigation suggest that the challenge of present times
requires a different approach than policies focused on the quantity of FDI inflows, a
shift from a mindset that prioritizes attraction of greenfield investments towards one
where the focus is on subsidiary development and a focus on changes in the policy
mix and in the approach to performance measurement.

To the contrary studies reported in this volume show that domestic enterprises and
efforts of national level S&T institutions seem to matter more in the sectors that have
proven to be dynamic in terms of innovation making. Experience of the implementation
of the third generation policies of FDI promotion and innovation making is clear that
the pathways of growth constituted during the period of liberalization were by
themselves certainly insufficient for the introduction of major innovations. By shaping
the institutions and incentives in the same direction for market and non-market actors
the narrowly defined pathways of growth were instrumental in not allowing their
processes of competence building and innovation making to go beyond the activities of
outsourcing of services and manufactures and exports to regulated markets in select
product segments. Demand side signals for the activities of innovation of both non-
market and market actors were not helpful for the efforts to be undertaken for the
benefit of indigenous innovation.
In the situation the NSI of BRICS countries have been shown to be getting harnessed
less for major innovation of indigenous kind and far more by S&T asset seeking and
outsourcing markets related FDI for minor innovations. It is apparent that policy
coordination would need to appropriately focus on the management of the
interplay of global push and domestic pull factors. Policymakers need to keep in
mind that foreign capital is collectively in better position to forge a new international
division of labour in which FDI is their most important instrument for the incorporation
of domestic private capital and publicly funded S&T infrastructure. It cannot be
ruled out that in the absence of suitable policy coordination domestically developed
expertise may get used far more for the development of global networks of production
and innovation for the benefit of world market. Alliance building and interactions
of domestic and foreign firms need regular monitoring with the aim of not only
undertaking programmes and policies to take benefit of the possible realization of
spillover, linkage, competition and demonstration effects but also to prevent and
minimize the liabilities and distortions being experienced by the systems of innovation
in the presence of greater FDI.


















CONCLUSION

The development of innovative process is connected with improvement of quality of
scientific researches in the leading branches of knowledge, broad introduction of
innovations in the production, with the improvement of the quality of students training.
The main directions of the development of innovative processes in BRICS countries are:
The further development of science and technology.
The expansion of scientific researches and development.
The introduction of innovations in the production.
The improvement of the quality of education in the Universities.
The development of the patent business.
The improvement of the quality of the published results the increase of the number
of links to them in the international editions.

In terms of the onus of directing FDI and guiding domestic firms and national level
S&T structures to leverage the local factors for the development of appropriate kind of
relationships the government must bear the responsibility of formulating the relevant
elements of policy coordination in respect of technology transition management and
development of systems of innovation. Policy coordination is required in respect of
especially those policies that shape the management of the dynamics of emerging
networks, the nature of specialization, the development and implementation of
appropriate technologies, and the development of long or short term relationships of
domestic firms and national level S&T organizations. As far as the area of innovation
policy is concerned, policy coordination would need to target especially the areas of
policy interventions capable of providing opportunities to the national level S&T
organizations, the young start ups and the domestic firms to harness the spillovers,
competition and demonstration effects at home itself for the benefit of indigenous
innovation. It is clear that the fundamental political arrangements which structure a
country's domestic institutions and international linkages in the policy regime under
implementation are what ultimately determine a country's propensity to undertake
indigenous innovation.

FDI cannot play the role of network organizer with the aim of benefiting the processes
of competence building and innovations needed by the local productive structures.
Policy coordination should be taking care of the changes to be made with regard to the
direction and promotion of foreign direct investment. Policy space exists in abundance
in respect of the determination of policies of investment, competition, procurement,
demand articulation, R&D subsidies and standards making. The government has to
determine the goals of development of national system of innovation. The host
government must take responsibility, put the politics in command and undertake the
policy coordination. In order to meet the challenge of development of the pathways of
growth for undertaking inclusive development the government can get the relevant
domestic actors to initiate and develop innovation making programmes for the benefit
of self-reliant development.
Since the pathways of growth accompanying the new policy of FDI promotion have to
bear a significant part of the responsibility for the institutions and capabilities of NSI to
evolve in a myopic way during the period of liberalization, foreign subsidiary
development cannot be the aim of the third generation policies of FDI promotion and
innovation making. Specific aims of the government of any latecomer country in respect
of the policy coordination have to flow from the developmental needs of the people and
the upgrading requirements arising out of the need to alleviate the constraints facing the
national system of innovation with regard to the management of technology transitions.
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