9 Technological Spillovers from Multinational Companies to Small and Medium Food Companies in Nigeria Isaac O. Abereijo and Matthew O. Ilori Obafemi Awolowo University, Ile-Ife Nigeria 1. Introduction The economic future of developing countries like Nigeria depends to a greater extent on whether and how domestic small and medium enterprises (SMES) benefit from the present liberalisation and globalisation. This is because unlike the previous decades, the most important determinants for survival from the 1990s are now quality, speed and flexibility (Economic Commission for Africa, 2001). Empirical evidences however show that majority of SMEs in developing countries are not well prepared both for these new conditions and for the increased competition of the global markets (UNCTAD, 2005). While the trade liberalisation is increasing the ability of well-established foreign firms to penetrate remote and underdeveloped markets, the SMEs in developing countries are finding it difficult to survive or, at least, maintain their business position in the local market (UNCTAD, 2005). This is because majority of SMEs lack the adequate resources to conduct research and development (R&D) which is traditionally considered as the main source of technological innovation for competitiveness. The central finding in the literature on innovation indicated that, in most cases, innovation activities in SMEs depend heavily on external sources for them to remain competitive (Fagerberg, 2005; Abereijo and Ilori, 2010). Equally important is the international knowledge flows through foreign direct investment (FDI), trade, licensing and international technological collaborations, which can serve as important determinants of the development and the diffusion of innovations to SMEs (Damija, Jaklič and Rojec, 2005). Infact the international lessons on SME development show that external factors such as inter-firm co- operation, institutional support, and learning from various external sources of knowledge are playing a key role in helping SMEs to build up technological capabilities that will enable them compete in regional and global markets. FDI, as one of the external sources, is theoretically assumed to play an important role in assisting local firms to experience production externalities from technological spillovers both within industry and across industries. The empirical relevance of the spillover argument is conceptually related to the transfer of non-conventional factors of production, including technology, management skills, and motivation between foreign and domestically owned firms (Vera-Cruz and Dutrenit, 2005). www.intechopen.com