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Archives of Business Research – Vol. 10, No. 7
Publication Date: July 25, 2022
DOI:10.14738/abr.107.12304. Pavan, B., & Shafighi, N. (2022). International Technology Transfer and Economic Development. Archives of Business Research,
10(7). 20-33.
Services for Science and Education – United Kingdom
International Technology Transfer and Economic Development
Pavan Badrinarayanan
bbw University of Applied Sciences, Berlin, Germany
Najla Shafighi
bbw University of Applied Sciences, Berlin, Germany
ABSTRACT
This paper intends to critically examine the concept of International Technology
Transfer, considering Japan whilst they provide necessary tech advancements ideas
for innovation to another transferee country i.e., India. This country realized the
high significance of the technology transformation for its fast economic and
commercial growth. We will also be analyzing Japan’s position as a tech superpower
and an economic superpower. To analyze the economic development, a
comparative study will be made with India. Here, Japan is the transferor, and India
is selected due to its high intentions for development, and hence it needs support
from developed nations with better technology. In this study, we take the balance
of payment as the dependent variable and GDP, inflation rate, Exchange rate, and
FDI as independent variables. Data is analyzed and results are obtained using
regression which helps us analyze quantitatively. The data from the World Bank
database about India and Japan has been obtained for the periods 2000-2019. This
study helps us to interpret and find the key impacting factors of the balance of
payment behavior in these nations. The empirical results show that India's GDP, as
well as the inflation difference between Japan and India, are found to be very
critical. The coefficient of India's GDP and inflation difference was positive while
India's exchange rate and India's FDI were found to be negative. As the impact of
India's exchange rate and India's FDI was negative, it is proof that an increase in
India's exchange rate and India's FDI results in a decrease in the balance of
payment, thereby the trade is ultimately affected. These results contain useful
information that can be used by policymakers.
Keywords: Balance of Payment, Japan, India, International Technology Transfer, FDI,
GDP, Inflation, Exchange rate.
INTRODUCTION
The flow of data from the creator to the secondary user, mainly from the developed countries
to the developing country to increase their economies is known as technology transfer. Designs,
materials, software, inventions, trade secrets, or technical expertise can be transferred from
one company to another or from one country to another. The processes, policies, and values of
each country/organization included guiding the process of technology transfer. Productivity,
health, income, and lifestyles of individuals and countries are highly influenced by technology.
The less developed countries feel that they are far behind the developed countries because of
rapid technological advancements and insufficient infrastructure, and the transfer of
technology has become a major source of concern for scholars, businesses, and policymakers.
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However, due to many obstacles and constraints such as lack of infrastructure and educational
growth of people, technology transfer has become a difficult process. One of the main problems
overlooked in technology transfer is to acquire a clear procedure to determine the best
technology among several other technologies.
Tech transfer and its promotion in the country itself were twinned with the immense growth
in Japan’s direct overseas investment during the years 1967 to 1973. The direct overseas
investment outgrew ever before because the Asian countries showed a positive attitude
towards foreign direct investment in accord with them swapping to export-oriented
industrialization and Japan’s liberalization of capital movements along with rising wage costs
in Japan. During the late 1960’s Japan was surfacing to be a technology exporting nation largely
to the developing countries in Asia. Concurrently, it is broadly accepted that technology transfer
is crucial to a country’s industrial and economic growth. LDCs are more likely to increase their
productivity and efficiency by receiving technical skills and knowledge from affluent countries.
By transforming inputs into outputs, effective technology transfer permits these countries to
efficiently utilize human & natural resources. Also, it allows to expand their technical abilities
by bringing in and acquiring technologies from other countries. The technology transfer
appears to be a main strategic element that should be combined with the national development
planning of LDCs. The experiences during the last three decades of the East Asian Countries
show that these countries can maximize their outcome, upgrade their labor force skills, and
speed up the industrialization process through adoption, adaptation, and absorption of
imported technologies. The developing countries are satisfied that it is impossible to align the
development gap concerning the industrialized nations within the predictable future.
According to Jafrieh (2001) Industrial countries are themselves aware of the developing
countries’ constantly growing significance as markets for their exports and that they should
therefore have the technology to self-build competitive export to fund their imports from the
developed countries.
Despite the major significance of tech transfer in the growth of less developed countries’
industries and technologies, there have been some common issues with successful and effective
technology transfer. These complications, which comprises of the receiving country’s lack of
absorptive capacity and the negligence of the transferor to transfer the real technology and
technical expertise resulted in the unsuccessful transfer of technology. Hence, these countries
must encourage their domestic technical capabilities to effectively adjust and embrace overseas
technologies for their domestic needs. LDCs should also find and solve their technological
weaknesses, such as creating proper industry and technology infrastructure. The imported
technology must be modified and linked to the current technologies which could take it to a fast
industrialization process.
LITERATURE REVIEW
Japan being a technological giant has always attracted the developing countries like India to
seek its assistance and help strategic technological cooperation in key areas like Artificial
Intelligence, Financial technology, Space, Rare piles of earth as well as in Advanced Materials,
Critical Cyberinfrastructure, and developing robust Information and Communications
Technology (ICT) products (Australian Institute of International Affairs) in supply chain.
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Due to Japan's international competitiveness in optical undersea cable network, India has
worked with Japanese firms to develop the Digital India programme. The Andaman and Nicobar
Islands, which are strategically important, were connected to Chennai by the NEC Corporation
(Japanese multinational information technology and Electronics Corporation). India is
developing a new undersea optical cable project to connect Kochi and the Lakshadweep Islands,
and it may enlist Japan's assistance. The cable that runs between Singapore-Myanmar-India,
that intends to improve network communications arising from Asia is also involving Japanese
corporations. Also, developing smart islands and cities in India utilizing cleaner and energy- efficient technologies is an important priority in the India-Japan partnership due to the
possibility to solve concerns about energy safety, the economics, and the ecology. The ability to
transition from coal and oil to greener, clean power while possessing the necessary technical
knowledge, financial resources, and infrastructure is projected to alter geopolitical balances
and resource politics. Tokyo's growth goal includes AI in addition to telecom technologies.
Japan's Artificial Intelligence Technology Strategy was formulated by the "Strategic Council for
AI Technology", which outlined Research and Development in the field of Artificial Intelligence
and the commercialization plan of Japan to create an Artificial Intelligence oriented platform
before 2030. The next revolution in productivity will be driven by Artificial intelligence (AI)
and robotic sensors. AI and data science are now included in Japan's R&D tax free status, as well
as financing for the creation of new AI-powered robots. While major nations are harnessing AI
because it has the potential to transform manufacturing, labor markets, trade, and defense, the
debate over its impact on geopolitics is equally significant. Countries who invest early in AI
innovation will profit not only in terms of competing globally, but also in terms of possessing
power geopolitically (Digvijay, Shafighi, 2021). As a result, creating an ecosystem that supports
AI start-up R&D while also improving human capital is critical (Chavan, Shafighi, 2021).
International Technology Transfer Policies
MNEs are a major knowledge source and economic growth source around the world, as
indicated through the increased concentration on policies targeted at enticing and retaining
foreign investment. According to Andrenelli, policies that attempt to provide a proper
supportive environment for ITT, policies that may have the effect of imposing ITT to varied
degrees, and policies that result in a forced transfer of technology are all part of the continuum
of ITT-related measures, Andrenelli, A., Gourdon, J. and Moïsé, E. (2019).
Market failures and externalities associated with technology transfer and dissemination have
been deemed substantial enough in numerous cases to necessitate government intervention.
Such approaches include specific actions relating to Intellectual Property Rights (IPR), the
facilitation of Foreign Direct Investment (FDI) that is related to technology, and policies
targeted at increasing absorption capacity. According to the OECD Policy Framework for
Investment, promotion and facilitation includes strategies like reducing bureaucratic hurdles,
establishing entities to promote investment, establishing data-sharing connections, and
improving the ecosystem. Despite efforts to focus investments from abroad towards modern
technological industries, these programs target luring abroad firms and expediting the foreign
investment method. (Chavan, Shafighi; 2021)
IPR rules may be applied in a way that discriminates against foreign interests to enable the
transfer of technology from foreign investors to local enterprises (Maskus, 2000). According to
a survey about IPR practices and regimes, the agreeable impact that IPR protection has on ITT
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varies depending on the host nation's development level. Liegsalz and Wagner (2013) present
an outline of the State Intellectual Property Office's (SIPO) institutional basis in patent
examination. Mansfields (1994), offered groundbreaking evidence suggesting technology- intensive enterprises are wary of transferring breakthrough innovations to nations with weak
intellectual property regulations (Edrak et al, 2014).
As a result, emerging countries with superior technology may be able to strengthen their
intellectual property protection and so increase their attractiveness to potential investors
(UNCTAD, 2005).
Japanese investment in India
On a net flow basis, Japan's FDI in India increased to $5,551 million in 2008, followed by $3,664
million in 2009. But, objectively speaking, FDI of Japan in India has lost pace after the two
enterprises exited the market, whereas from 550 during 2008 till 1,441 in 2018, the number of
enterprises joining the Indian market has continuously increased and is expected to reach more
than 6000 in 2022.
According to a study conducted by the Reserve Bank of India, Japan topped the list of countries
with which Indian companies engaged in Foreign Technology Collaboration (FTC) in 2012-13
and 2013-14.
The share of agreements involving during the survey period:
1. Royalty and technical fees as whole made-up 30.5 percent,
2. Only royalty stood at 48.1 percent
3. Only lump-sum technical costs accounted for 21.4 percent.
Investments by japanese in india ate poised for a boom
These efforts are reflected in recent deal figures. Between 2015 and 2020, more than 90
Japanese mergers and acquisitions (M&A) agreements were conducted in India, with an
average deal value of $45 million and a total value of around $10 billion. (Japanese investments
in India are poised for a boom. (2021))
Towards Economic Development
The economic link between Japan and India has gradually grown and developed in recent years.
The trade amount between the two nations has grown. In 2010, India was Japan's 18th largest
trading partner, and in 2020, Japan will be India's 12th largest trading partner. Also, Japanese
direct investment in India has increased, and India's 4th huge investor was Japan in FY2020.
The interest of the private sector of Japan in India is growing, and there are currently 1,455 big
Japanese organizations with branches in India.
Two leaders reaffirmed their commitment to combine India's demographic dividend with
Japan's technology and capital to realize the actual potential of the Japan-India economic
partnership for a flourishing future at recent summit discussions. Two leaders applauded the
decision to conclude a 75 billion US$ Bilateral Swap contract, the start of the digital partnership
between Japan and India, and other cooperation and initiatives.
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Economic Transformation
Since 2002, the overall volume of commerce between Japan and India has increased, reaching
around 6.8 billion US dollars in 2005. But this figure does not reflect the economic power and
the potential of the two countries. Japan and India's trade share are shrinking, as is their relative
importance. Among Japan’s export destinations, India ranks 26th among (0.6 percent) and
among the import sources, 28th (2.8 percent), with Japan ranking 10th among export
destinations (2.5 percent) and 10th among import sources (2.8 percent). The interest of Japan
in India is expanding for various reasons, which also includes the country's enormous and
developing economy as well as its resources, particularly its human resources. The exports
from India to Japan totaled 3.94 billion US dollar, compared to US$ 7.93 billion in imports. The
principal exports from India to Japan are petroleum industry products, chemicals, elements,
compounds, non-metallic mineral goods, fish & fish preparations, metalliferous ores & scrap,
clothing & accessories, iron & steel products, textile yarn, textiles, and machinery. India's key
imports from Japan are machinery, electrical machinery, iron and steel commodities, plastic
materials, nonferrous metals, automotive components, organic chemicals, metal manufactures,
and other items.
Investment and FDI
Between January 2000 and December 2017, Japanese investments in India totaled $27 billion,
accounting for 7.3 percent of the country's total FDI inflows. Telecommunications received 12
percent of FDI equity inflows from 2000 to 2016, 26 percent from the Drugs and
Pharmaceuticals sector, 22 percent from the Service sector, 19 percent from the Automobile
sector, and 13 percent from the Metallurgical sector. India was identified as the second most
desirable investment location by Japanese companies in a poll conducted by the Japan Bank for
International Cooperation (JBIC) in FY2017.
Trade Relationship
Goods trade is a vital component of any economic partnership between two countries. Japan is
one of the world's main trading potentials, but India's unilateral trade liberalization has
progressively expanded the Indian economy's trade intensity. Despite this, commerce between
the two nations has remained stagnant.
In general, international conventions have guided both economies' trade, and both the nations
are committed to strengthen rules-based multilateral trading systems. India and Japan have
also pledged to cooperate in the development of an East Asian community, and they
collaborated at the East Asia Summit to promote regional economic integration in Asia.
The quantity and the kind of Japanese FDI into India explains at least some of the above- mentioned bilateral trade stagnation, both in terms of quantity and composition. Unlike Japan's
investments in China, South Korea, Thailand, and Singapore, it appears that Japan's investments
in India have been predominantly focused on servicing the Indian domestic market.
METHODOLOGY
In this study, we used secondary data to gather from the year 2000 to 2019 to utilize
independent variables on determining economic progress. The world bank provides secondary
data for this publication. The overall length of time is 19 years. The sample size is based on data
from the previous 19 years. (Without eliminating any data.). The Method used for examination
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is regression analysis. As a result of technology transfer, there are numerous elements that play
a critical role in determining a country's economic success. The relationship between the
exchange rate and other independent variables including inflation, foreign direct investment,
gross domestic product, exchange rate, and BOP is investigated. And this information will be
compared between Japan and India. The balance of payment is chosen as dependent variable
for the reason to identify the total trade between Japan and India with respect to the
independent variables such as FDI, Inflation rate, GDP, and Exchange rate. Hence, by calculating
the trade value (imports/exports), the international technology transfer is identified.
Figure 1. Research Framework (Author)
Balance of Payment
BOP, which stands for Balance of Payment, helps to keep track of financial transactions
involving people, organizations, and governments. The statement of a nation describes if the
nation has excess funds or under deficit. For example, if there are more exports than imports,
then BOP will be in surplus. On the other hand, the vice versa would mean there is a deficit. The
importance of BOP of a country could be explained with these justifications:
• A country's BOP explains its economic situation
• It also describes the appreciation or depreciation of the national currency
• The BOP statement helps the government to make crucial decisions regarding budgeting
and trade policies
• It provides crucial data for analyzing and comprehending a country's financial
connections with different nations
Balance of payment mainly has three components which are current account, capital account
and finance account. The sum of the capital and finance accounts should be equal to the sum in
the current account. Tracking of receipts and transactions made for production of materials as
well as the tracking of commodity and service trade between nations are enabled by the current
account. Furthermore, it also contains transactions that are made internationally across
countries. Finally, the cash flow between nations through land, entrepreneurship and FDI are
all accounted in the financial account. Moreover, the home assets owned by foreign entities as
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well as assets in a different country owned by domestic entities are accounted for here
(Digvijay, Shafighi 2021).
The activities engaged in production, income generation and distribution, consumption, and
accumulation in the general economy are all influenced by the balance of payments flows.
Credit and debit entries in balance of payments accounts for commodities and services, for
example, are equivalent to product and service export and import flows. These flows are
recorded in the economy's goods and services account, which has an influence on GDP
measurement and final demand component composition (e.g., final consumption, gross capital
formation, etc.).
Inflation Rate
Inflation refers to the rate at which prices rise over time. Inflation is defined as a wide measure
of price fluctuations or increases in the cost of living in a country. Inflation is a measurement of
how much something costs.
Higher inflation is inevitable in nations that are undergoing intensive financial growth. As
aggregate demand (AD) increases higher than the aggregate supply, the inflation rate is
expected to become even higher. Whereas there is also a case where supply is outpaced by
demand which is an indicator that the economic growth is not sustainable in the long term as it
is too quick (Moosavi, and Gharleghi, 2021).
Inflation could hamper economic growth mainly due to the following reasons:
• Inflation causes relative price distortions in economies that have not fully adjusted to a
certain rate of inflation. Real interest rates become negative and erratic when nominal
interest rates are managed, discouraging savings. Exchange rate depreciation falls
behind inflation, resulting in real appreciation and exchange rate volatility (Gharleghi
and Shaari, 2012; Gharleghi and Shafighi, 2015).
• Real tax revenues do not keep pace with inflation since they are based on nominal
incomes from the previous year (the Tanzi effect), and public utility expenses do not rise
in lockstep with inflation. Inflation exacerbates the fiscal problem for both reasons, and
public savings may be reduced. This could have a negative impact on public investment.
• Inflationary pressures are unsettling. Inflation rates are unclear in the future, which
diminishes investment efficiency and discourages potential investors.
Gross Domestic Product
• GDP is defined as the total financial or commercial value of all completed services that
are produced inside a nation's boundaries in a specific time frame. As it is a wide metric
for all home manufacturing, it acts as a complete evaluation for an overall health of the
economy.
• GDP is a metric for estimating the scale and growth rate of the economy of a nation.
• Expenditures, output, and income are the three methods for calculating GDP. It may be
modified for inflation and population to offer more details.
GDP may be calculated in three different ways. All three techniques should return the same
result if they are computed correctly.
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Exchange Rate
The value of a currency (the local currency) in relation to a different one is referred to as the
exchange rate (foreign currency). Another explanation for exchange rate could be said as the
rate at which a country's currency can be exchanged for another countries. Exchange rate has
a crucial role in global financial transactions. Moreover, oscillations in these rates have
impacted other vitals like interest and inflation rates, trade, and output, among others. The
relevance of the exchange rate arises from the fact that it links two different nations' price
regimes, allowing international trade to simply compare exchanged products.
A strong exchange rate can depress economic growth because:
• Exports are becoming costly, which causes a reduction in export demand.
• Imports are less expensive, hence imported goods are in more demand (which leads to
reduced demand for home grown goods).
• This consequently decreases Aggregate Demand (AD)
• In addition, the country maintained having high interest rates to sustain the strength of
its currency. Such interest rates, on the other hand, slowed financial development.
A currency devaluation (a decrease in the purchasing power of money) may frequently help to
boost wealth creation. Lowering the currency rate decreases the exporting cost while also
increasing demand for British goods. This can help to improve economic expansion by
increasing demand.
Such a devaluation leads to inflation:
• Import of goods get costlier
• Demand for home-grown products increase
Foreign Direct Investment
One of the most important channels for technology transfer is foreign direct investment (FDI).
FDI incorporates all flows from the investor, whether directly or through affiliates, in national
income calculations. It also contains equity capital, as well as reinvested earnings, and net
borrowings. There is a substantial amount of common literature on the benefits and drawbacks
of FDI for the nations that are developing. Out of these, the most significant benefit of FDI is that
it introduces new information, technological expertise, economic, and business abilities. The
major motives for a company to get involved in global investment are to gain ownership of
businesses in different nations and to utilize the company's advantages abroad. For many
developing countries, the relevance of FDI as a technology transfer channel has been critical.
Except in South Korea, where FDI is a key technological resource in certain areas like chemicals,
electronics, and refining petroleum, this is especially true for East Asian countries (Fransman
M., & King, K., 2021). Japan’s MNCs turned into the world's most significant moves of worldwide
capital and the world's most significant wellspring of innovation. Japanese MNCs in general
pack their interest in North American and the European Countries, that represented the greater
part of Japan's absolute venture surge in assembling during the period 1950-1990 (Kaosa-ard,
M. S., 2017).
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DATA ANALYSIS
The following table shows that data of trade between Japan and India from the year 2000 to
2019 (Trend Economy data)
Table 1: Trade between Japan and India from the year 2000 to 2019
Trade between Japan-India (US$ Million)
Years Exports Imports BOP
2000 2,277 2,415.70 -138.21
2001 1,987 2,289.04 -302.45
2002 1,870 2,094.69 -224.36
2003 2,391 2,179.43 211.73
2004 3,044 2,613.96 429.72
2005 3,518 3,192.18 325.72
2006 4,453 4,054.99 397.97
2007 6,156 4,173.68 1,982.22
2008 7,895 5,256.08 2,639.42
2009 6,338 3,728.11 2,610.35
2010 9,042 5,698.04 3,344.16
2011 11,078 6,822.96 4,254.89
2012 10,591 7,000.14 3,590.40
2013 8,593 7,072.38 1,520.65
2014 8,130 6,987.50 1,142.73
2015 8,110 4,865.17 3,244.69
2016 8,189 4,674.42 3,514.34
2017 8,851 5,356.43 3,494.42
2018 11,011 5,497.60 5,513.47
2019 10,978 5,364.65 5,613.70
The corresponding table shows the log values of the corresponding data for dependent and
independent variables.
Table 2: Log values of the corresponding data for dependent and independent variables.
(Author)
Dependent
Variable
Independent Variables
BOP (Japan –
India)
GDP - India Inflation
Difference
Exchange
Rate – India
FDI - India
2.218115186 1.17E+01 0.670803941 1.652648578 9.554394333
0.001300933 1.17E+01 0.655075553 1.673816976 9.70995594
1.89814466 1.17E+01 0.71772475 1.686728473 9.716751615
2.711962032 1.18E+01 0.608783842 1.668230104 9.566081976
2.865202929 1.19E+01 0.577010171 1.656256041 9.734739919
2.79876735 1.19E+01 0.65603079 1.644438343 9.861498998
2.845977831 1.20E+01 0.744070912 1.656165386 10.30166185
3.359012712 1.21E+01 0.800224913 1.616460109 10.40187836
3.468770402 1.21E+01 0.843182192 1.638541003 10.63755254
3.464460083 1.21E+01 1.087610706 1.684892617 10.5512227
3.562008967 1.22E+01 1.104124001 1.660161427 10.43770119
3.658807048 1.23E+01 0.960280206 1.669042144 10.56227686
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3.590379646 1.23E+01 0.971479245 1.727843965 10.38013315
3.261049515 1.23E+01 1.02371339 1.767881648 10.44952516
3.160221437 1.23E+01 0.555244485 1.78554337 10.53878283
3.55000025 1.23E+01 0.706112309 1.8072102 10.64354636
3.581812031 1.24E+01 0.703952475 1.827336958 10.6479555
3.579539882 1.24E+01 0.306140821 1.81372773 10.60169168
3.764693237 1.24E+01 0.588920791 1.834986253 10.62446208
3.772112487 1.25E+01 0.856289001 1.847696021 10.70424189
RESULTS-ANALYSIS
Now, the result of relation, and the reliability to determine the Balance of Payment with the
help of Regression Analysis.
In this research,
BOP = India GDP, Inflation difference, India Exchange Rate, India FDI
Regression Analysis
To evaluate what this information explains in finalizing the Balance of Payment with the help
of independent variables such as India GDP, Inflation Difference, India Exchange Rate, and India
FDI.
Table 3: Regression Statistics (Author)
The independent variables’ classification towards the dependent variable is done by
Regression. In the table above, Multiple R is the correlation and R square tells how properly the
model fits our data. If the r square value is 0 to1, then the model is perfect.
From the above table, R square value is 0.7402 (74.02%). This means that 74.02% of the data
collected explains the relation between the dependent and independent variables. Also, it is
seen that the data collected is precise and yields good results to explain the reliability in
determining the Balance of Payment.
Anova table
The below ANOVA table analysis is performed to explain if this model is efficient. All the
variables taken in the above analysis can be included as the ANOVA result in the Table 4 proves
that there is significant difference between the mean of the variables.
Table 4: ANOVA test (Author)
Regression Statistics
Multiple R 0.860401561
R Square 0.740290847
Adjusted R Square 0.671035073
Standard Error 0.506814655
Observations 20
ANOVA
df SS MS F Significance F
Regression 4 10.9825885 2.745647125 10.68922924 0.000266097
Residual 15 3.85291642 0.256861095
Total 19 14.83550492
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From the above ANOVA table (Author), Significance value F is smaller than alpha, i.e., α = 0.05,
hence this model really fits well for the analysis. Also, it indicates overall, the significance of the
overall predicted regression model to study the balance of payment. As the P Value is smaller
than 0.05 (P<0.05), this calculation helps in increasing the confidence level for the regression
analysis projected for the given data set is satisfactory, acceptable, and valid. The R square value
is the ratio of Explained error (due to regression) divided by the total amount (ANOVA table).
The below table is the regression analysis result (Author) and indicates the overall result of the
coefficient produced from multiple regression analysis. The coefficient result will be used and
explained.
Table 5: Regression Analysis Result (Author)
From the coefficient value from the above table, it is straightforward to assess the correlation
between independent variable and Dependent variable. It is observed that coefficients of
independent variables India GDP and inflation difference are positive whereas coefficient of
India exchange rate and India FDI are negative.
That means if India GDP and inflation difference increase, the Balance of Payment (BOP) also
increases. Hence, from these findings, it can be observed that independent variables like India
GDP and inflation difference are directly proportional to Balance of Payment and indirectly
proportional to India Exchange Rate and India FDI. As independent variables India Exchange
Rate and India FDI decreases, then the dependent variable Balance of Payment increases or
vice-versa.
Inference
Hypothesis analysis done from regression analysis, it is found that p-values of independent
variables India GDP and India exchange rate are less than alpha (α = 0.05) whereas p-values of
independent variables Inflation difference and India FDI are more than alpha (α = 0.05). It can
conclude that hypothesis of independent variables India GDP and India exchange rate are
accepted whereas hypothesis of independent variables inflation difference and India FDI are
rejected. Hence, it explains that there is correct correlation between the independent variable
India GDP and India exchange rate as compared to other independent variables like inflation
difference and India FDI for determining the Balance of Payment.
CONCLUSION AND DISCUSSION
In conclusion, the Comprehensive Economic Partnership Agreement (CEPA) between India and
Japan has to be finalized as soon as possible so that both bilateral trade and investment may
reach their full potential, given the two countries' respective economic sizes. Compared to other
major economies, trade and investment values are similarly low. Japan's trade and investment
flows to India account for barely 3% of Japan's total trade and investment flows to China.
Despite India's potential as an investment destination, as emphasized in a JBIC survey done in
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -40.82934054 9.255569766 -4.411326539 0.000505318 -60.55712051 -21.10156057 -60.55712051 -21.10156057
GDP - INDIA 5.201117455 1.632118553 3.186727731 0.006128106 1.722339106 8.679895804 1.722339106 8.679895804
INFLATION DIFFERENCE 0.020028613 0.700619879 0.028586989 0.977570868 -1.47330731 1.513364536 -1.47330731 1.513364536
EXCHANGE RATE - INDIA -6.426750767 2.835222165 -2.266753853 0.038623411 -12.46988376 -0.383617772 -12.46988376 -0.383617772
FDI - INDIA -0.786767772 0.859098696 -0.915806037 0.374257385 -2.617893297 1.044357753 -2.617893297 1.044357753
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Pavan, B., & Shafighi, N. (2022). International Technology Transfer and Economic Development. Archives of Business Research, 10(7). 20-33.
URL: http://dx.doi.org/10.14738/abr.107.12304
2008, the flow of investment from Japan in recent years has been insufficient. Japan's
infrastructure technologies and investment can assist India's infrastructure industry bridge the
supply gap. Furthermore, Japan's IT hardware may enhance India's software strengths, while
India's strengths in pharmaceutical, biotechnology, and auto components can complement
Japan's expertise in heavy engineering, vehicles, equipment, and chemical manufacturing. The
Indian government is implementing reform and liberalization measures in recognition of the
importance of attracting FDI in the nation. India is one among the top 10 FDI-attracting host
economies, according to the United Nations Conference on Trade and Development's
(UNCTAD) 2018 World Investment Report. As of 2017, Japan is India's fifth largest FDI investor,
accounting for 4% of the country's FDI inflows. Overall, enhanced commercial and political ties
benefit both India and Japan significantly. The trade with Japan has never been stronger than it
has been in recent years when Japanese investors have poured money into various industries
and Indian imports have been boosted. The weak infrastructure, taxation system, and
administrative issues are inhibiting Japanese investment in India. However, as a result of the
easing of constraints as a result of several bilateral agreements between the two nations, Japan
began investing directly in infrastructure. Despite not being a member of the RCEP, India's new
diplomatic strategy, known as the "look-east" policy, has resulted in improved commercial
relations. India's infrastructure development is aided by improved economic relations with
Japan. The trade imbalance between India and Japan is concerning, and certain actions must be
implemented to close the gap. Changes in policy should be made to identify areas where India's
commodities might be exported to Japanese markets. Japan's investments, on the other hand,
boost the (Indian) economy by offering superior resources. On a variety of fronts, it is clearly
clear that Japan and India are not just dealing with physical things but are also leveraging an
underlying history of cultural interactions for the mutual benefit of their citizens. While India
and Japan develop their respective economies and begin to have an influence on international
trade, the two nations may not hesitate to expand their collaboration and partnership in a
variety of areas. To increase Japanese investment in India, India has to communicate
information on investment possibilities, establish new areas of partnership and cooperation,
reduce administrative hurdles, and eliminate delays.
Finally, technology upgrading in a growing economy is determined by the level of acceptance
and assimilation of foreign technologies, which is impacted by local product market
circumstances, determinants (such as skilled labor), and government policies and institutions
(such as trade and competition policies, and regulatory framework). Many developing nations
are struggling to create a clear, comprehensive, and effective policy environment that
encourages investment in skills and technology, as well as the institutional capacity to
implement such policies. They must also adopt strong macroeconomic policies that promote
long-term high growth, price stability, and stable external accounts. A stable and effective policy
environment not only encourages skill development and innovation, but also better prepares
the country to profit from increased FDI and trade. The further study can be made by analyzing
on the legislative policies of Japan, for a similar adoption by the Indian parliament.
The major aim of this research was to analyze the technology transfer from Japan to India by
measuring the dependent variable balance of payment using the independent variables
Inflation rate, exchange rate, FDI, and GDP. All the data was obtained from the World Bank
database. The results revealed that India GDP and inflation differences between Japan and India
are found to be very significant in determining the balance of payment. The coefficient of India
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Archives of Business Research (ABR) Vol. 10, Issue 7, July-2022
Services for Science and Education – United Kingdom
GDP and inflation difference were positive while India exchange rate and India FDI found to be
negative. As the impact of India exchange rate and India FDI was negative, it is a proof that an
increase in India exchange rate and India FDI results in a decrease in the balance of payment,
thereby the trade is ultimately affected. More specifically, when the India exchange rate and
India FDI increases, the difference in all the money flowing into Japan in a specific time period
and the money outflow to India is affected. However, since India GDP and inflation difference
are positive, overall, both India and Japan are benefiting heavily from the strengthened trade
and diplomatic ties. Since the R square value is 74.02%, 74.02% of variation in the balance of
payment can be predicted from the variations in the India GDP, inflation difference.
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