T HERE is a growing body of literature on the choice of technology for developing countries.' Much of this literature deals with the factor proportions problem,2 yet there has been little attention directed to the role multinational firms may play in the choice of technology. Yeoman (1968) in a cross-sectional study comparing the operating characteristics of the foreign subsidiaries of 13 United States firms, did find that there was little difference in the amounts of capital used per worker in plants located in advanced, as compared with developing countries. Where the cross-elasticity of demand is low and where manufacturing costs are low, relative to selling price, as in the pharmaceuticals industry, there is little incentive to adapt technology. Yeoman found very little technological adaptation of production processes on the part of pharmaceutical firms. On the other hand, in the home appliances field where cross-elasticities of demand are high and the share made up by production costs in final value, high adaptation was more extensive and more labor was combined into the production process in developing countries. In contrast to Yeoman, the particular concern of this paper is to compare the operating characteristics of multinational and local firms with respect to the ratios in which they combine capital and labor in final output. We address the question: Do multinational firms employ production techniques which are more capital using than those employed by local firms producing similar products? If they do, they could then be singled out as a major contributor to the factor proportions problem confronting developing countries. Two field studies were conducted in which detailed information was compiled for 14 United States subsidiaries and 14 closely matched local counterparts. Nine matched pairs of firms were studied in the Philippines and five matched pairs in Mexico. In four of the sectors studied in the Philippines it was infeasible to obtain closely matched pairs in the Mexican field study.3

In recent years, several case studies have been conducted on the operations of individual foreign subsidiaries of United States firms.1 While these are useful, they do not provide a means of comparing the operating characteristics of direct foreign investments as they may relate to the level of development of the countries in which they reside. There also have been some excellent comparative studies.2 These have concentrated upon comparisons of United States controlled enterprises abroad with those controlled either by other expatriate groups or by nationals. Perhaps the only intercountry comparison of the operating characteristics of United States direct foreign investments was that by Anthony Y. C. Koo.3 Koo's analysis utilized data from an Office of Business Economics survey of United States investments in Latin America. Thus it was confined to a group of countries which were all relatively less-developed (as of 1955). Because that survey did not provide country data on an industry sector basis, Koo was unable to examine for country differences within industry sectors. The purpose of this article is to partially close this gap. Our objective is to explore the question: Are the performance characteristics of direct foreign investments within industry sectors significantly influenced by the level of development of the country or region which harbor those investments? To examine this question comprehensively, it would be useful to have time series data on a large cross section of countries and several industry sectors. Data should be designed to reflect the economic contribution of investments in various sectors. We could then evaluate the extent to which there may be inherent difficulties faced by lessdeveloped countries difficulties which restrain them from fully realizing the potential contributions of direct foreign investment. To evaluate and compare the economic contribution of various sectors to the host country, it would be useful to know the effects of investments upon:

INCE World War II, many developing countries have adopted a strategy of rapid industrialization to accelerate economic development and presumably to absorb unemployed or underemployed labor from the traditional sector. In spite of these efforts, the rate of economic growth has been far from satisfactory and unemployment has been persistent. Several authors 1 point to the adoption of more capital-intensive techniques of production as being responsible for the low rate of labor absorption. The objective of the present study is to examine the capital-intensity of the manufacturing sector for a cross section of developing countries, compared with a cross section of developed countries. We suggest that the capital-intensity of developing countries is relatively too high given factor endowments and market size. The hypothesis to be examined is as follows: The capital-intensity of output in the manufacturing sectors of developing countries behaves differently from that of developed countries. In general it tends to be higher than that of developed countries given respective levels of development.