In recent years there has been a spectacular growth in the technological capabilities of developing countries and in outward direct investment from firms based in these countries. Technological Innovation and Third World Multinationals argues that these phenomena are related. The emerging technological capabilities of Third World firms are allied to the cumulative growth of their outward direct investment. The existence and accumulation of technological capabilities is thus a determinant as well as an effect of their international production activities. Evidence is presented on the unique, innovative activities of MNEs from Asia and Latin America which, although at an early stage, have become increasingly important as international production evolves and as developing countries advance through higher stages of industrial development.