In most developing countries, and also in economies in transition, a key problem is how to refocus public research and development institutes towards more market-oriented activities aimed at enhanced technological capability of enterprises.
Certain conditions have to be fulfilled in order to reduce the inherent risks and uncertainties associated with investment in R and D and make it responsive to the needs of the industrial sector. These include, [inter alia], (a) political and economic stability, (b) the existence of competition and market incentives, (c) a critical mass of scientists, engineers and technicians, (d) an adequate physical infrastructure and (e) an enabling legal and regulatory framework. While such conditions are taken for granted in industrialized countries, several or all of these factors are often lacking in many developing countries and economies in transition.
Low levels of literacy and a scarcity of scientific, technical and managerial personnel in many developing countries have limited their capacity to absorb new technology; this has, in practical terms, diminished the possibility of engaging in industrial R and D. Lack of efficient telecommunications, reliable electrical power, good roads and port facilities, [etc] and the absence of an enabling legal and regulatory framework reduced the ability to do business generally. They also lower the returns on investment by the enterprise sector and reduce the incentive to invest in technology.
Lack of protection for intellectual property could discourage some TNCs from licensing their technology in certain sectors, such as pharmaceuticals and computer software, where they perceived a need for such protection order to preserve profit margins. In addition to these basic conditions, shortcomings in other areas that influence the climate for investment generally -- such as well-functioning financial markets -- would also tend to impede investment in technology and R and D. Finally, many developing countries had not yet made the explicit political commitment to technological development necessary for making investment in R and D, and R and D attractive to enterprises.