FDI has always been thought to affect the growth of local firms through technological spillovers and as such many developing countries have invested a lot to attract FDI. These spillovers can happen through FDI having backward, forward and horizontal linkages with local firms. Though in many countries FDI has contributed to the development of local firms, there is evidence to suggest that this is not always the case. There are instances where FDI has instead driven local firms out of business. The ability of local firms and more particularly SMEs to benefit from technological spillovers from TNCs is affected absorptive capacity. SMEs need absorptive capacity to in order to able to learn from TNCs. Absorptive capacity is usually proxied by the technology gap between the foreign and the domestic firms and in the case of large technology gap SMEs may not learn from TNCs. To support the linkages and spillovers between SMEs and TNCs the absorptive capacity of SMEs in developing countries can be nurtured though various Workforce Development programs and programs that would affect the human resource practices and organizational routines of SMEs.
| Published in | International Journal of Economics, Finance and Management Sciences (Volume 2, Issue 4) |
| DOI | 10.11648/j.ijefm.20140204.13 |
| Page(s) | 245-256 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2014. Published by Science Publishing Group |
Foreign Direct Investment, SME Growth, Absorptive Capacity
| [1] | Becker, M.C., Lazaric, N., Nelson, R.R. & Winter, S. (2005). Applying organizational routines in understanding organizational change. Industrial and Corporate Change, 14 (5), 775-791 |
| [2] | Blomstrom M. and Kokko A. (1997) “How Foreign Investment Affects Host Countries”, Policy Research Working Paper, The World Bank. |
| [3] | Borensztein, E., De Gregorio, J. and Lee, J.W. (1998) “How Does Foreign Direct Investment Affect Growth?” Journal of International Economics, 45:115-35 |
| [4] | Brown, J. (1997). Impossible dream or inevitable revolution? Investigating the concept of integrated marketing communications. Journal of Communication Management. 2 (1), p70-81 |
| [5] | Calagni G. (2003) ‘Foreign Direct Investment and its Effects on Local Economies in Sub-Saharan Africa’, |
| [6] | Campbell A.J., "Creating Customer Knowledge Competence: Managing Customer Relationship Management Programs Strategically" Industrial Marketing Management, vol. 32, no. 5, 2003. pp. 375-383. |
| [7] | Chua A.(2004), Knowledge management system architecture: a bridge between KM consultants and technologists, International Journal of Information Management, Volume 24 Issue 1, Pages 87-98 |
| [8] | Cohen, W.M. and Levinthal D.A. (1990) ‘Absorptive capacity: a new perspective on learning and innovation’. Administrative Science Quarterly; 35(1):128-52 |
| [9] | Conner K. R. & Prahalad C.K. (1996). A Resource-based Theory of the Firm: Knowledge Versus. Opportunism, Organization Science, 7(5), 477-501. |
| [10] | Creticos P. A., Michael A and Amy B. (2009). Labor Market Exchanges, Human Capital Formation Strategies and Workforce Development Practices: State of the Art Review: Report to RTI International Center for Governance and Economic Growth. |
| [11] | Crossan M.M. and Lane, H.W. (1999). An organizational learning framework: From intuition to institution. Academy of Management Review, 24: 522-537. |
| [12] | Daghfous A. (2004), Absorptive Capacity and the Implementation of Knowledge Intensive Best Practices., SAM Advanced Management Journal (1984) 69 (2), 21-27 |
| [13] | Dal Zotto Cinzia (2003) , Absorptive capacity and knowledge transfer between venture capital firms and their portfolio companies, A Paper presented at the DRUID Summer Conference 2003 on Creating, Sharing And Transferring Knowledge, The role of Geography, Institutions and Organizations, Copenhagen |
| [14] | Davenport, Thomas and Laurence Prusak, (1998), Working Knowledge, Boston: Harvard Business School Press. |
| [15] | De Moura Castro, C. and Norma G. (2003). Community Colleges: A Model for Latin America? Washignton, DC: Inter-American Development Bank. |
| [16] | Delaney, J. and Huselid, M. (1996) The Impact of Human Resource Management Practices on Perceptions of Organizational Performance. Academy of Management Journal 39, pp. 949-64. |
| [17] | Dunning, J.H. (1992). Multinational Enterprises and the Global Economy. England: Addison-Wesley Publishing Company. |
| [18] | Eisenhardt, K., and J. Martin (2000), "Dynamic capabilities: what are they?", Strategic Management Journal, 21, pp.1105-1121 |
| [19] | Fernandez-Stark K., Bamber P., and Gereffi G. (2011) Fruit and Vegetables Global Value Chain:Economic Upgrading and Workforce Development, Duke University, Center on Globalization, Governance & Competitiveness |
| [20] | Fernandez-Stark K., Bamber P. and Gereffi G. (2012), Upgrading in Global Value Chains: Addressing the Skills Challenge in Developing Countries, OECD Background Paper |
| [21] | Fernandez-Stark K., Bamber P. and Gereffi G. (2012), Upgrading in Global Value Chains: Addressing the Skills Challenge in Developing Countries, OECD Background Paper |
| [22] | Fernandez-Stark, K. Penny B. and Gereffi G. (2010), Workforce Development in Chile's Offshore Services Industry. Durham, N.C.: Duke University, Center on Globalization, Governance & Competitiveness. |
| [23] | Fromm I. (2007) Upgrading in Agricultural Value Chains: The Case of Small Producers in Honduras, GIGA Research Programme: Transformation in the Process of Globalisation, GIGA WP 64/2007 |
| [24] | Fu Xiaolan (2007), Foreign Direct Investment, Absorptive Capacity and Regional Innovation Capabilities: Evidence From China, OECD Global Forum on International Investment |
| [25] | Gereffi G., Fernandez-Stark K., Psilos P. (2011) Skills for Upgrading: Workforce Development and Global Value Chains in Developing Countries, Center on Globalization, Governance & Competitiveness, Duke University |
| [26] | Gereffi G. (1999). International Trade and Industrial Up-Grading in the Apparel Commodity Chain, Journal of International Economics 48(1): 37-70. |
| [27] | Girma Sourafel and Gorg Holger (2005), Foreign Direct Investment, Spillovers and Absorptive Capacity: Evidence from Quartile Regressions, Discussion Paper Series 1: Economic Studies No 13/2005, Deutsche Bundesbank |
| [28] | Giuliani E., Bell, M., (2005), When micro shapes the meso: learning networks in a Chilean wine cluster, Research Policy: In press. |
| [29] | Glass A. and Saggi K. (1998), “International technology transfer and the technology gap”, Journal of Development Economics, Vol. 55, pp. 369-398. |
| [30] | Glazer Rashi (1991), "Marketing in an Information Intensive Environment: Strategic Implications of Knowledge as an Asset," Journal of Marketing, 55 (October), 1-19 |
| [31] | Grant, R. M. (1996). Prospering in Dynamically-Competitive Environments: Organizational Capability as Knowledge Integration, Organization Science, 7(4): 375-87. |
| [32] | Hoi L. Q. And Pomfret R., Technology Spillovers from Foreign Direct Investment in Vietnam: Horizontal or Vertical Spillovers? Vietnam Development Forum, Working Paper Series, Working Paper 085, April 2008 |
| [33] | Humphrey J. and Schmitz H. (2002). How does insertion in global value chains affect upgrading in industrial clusters? Institute of Development Studies, Brighton. |
| [34] | Huselid, M., (1995), The Impact of Human Resource Management on Turnover, Productivity, and Corporate Financial Performance. Academy of Management, Journal, 38, pp.635-60. |
| [35] | Ikiara M. (2003), Foreign Direct Investment, Technology Transfer, and Poverty Alleviation: Africa’s Hopes And Dilemmas, African Technology Policy Studies Network, Nairobi |
| [36] | Kamoche K. and Mueller, F. (1998), “Human resource management and the appropriation-learning perspective”, Human Relations, Vol. 51 No. 8, pp. 1033-60. |
| [37] | Kaplinksy R and Readman J,(2001)Integrating SMEs In Global Value Chains: Towards Partnership for Development, UNIDO |
| [38] | Kokko A. (1994), "Technology, market characteristics, and spillovers", Journal of Development Economics, Vol. 43, p. 279-293. |
| [39] | Kokko A., Zejan M. and Tansini R. (2001), ‘Trade Regimes and Spillover Effects of FDI: Evidence from Uruguay’, Welwirtschaftliches Archiv, Vol. 137, pp. 124-49. |
| [40] | Kokko A., Tansini R. and Zejan M.C. (1996), "Local technological capability and productivity spillovers from FDI in the Uruguayan manufacturing sector", Journal of Development Studies, Vol. 32, pp. 602-611. |
| [41] | Lall S. & Narula R. (2004), FDI and its role in economic development:Do we need a new agenda? MERIT-Infonomics Research Memorandum series, 2004-019 |
| [42] | Lane J. & Lane A. M. (2001). Self-efficacy and academic performance. Social Behavior and Personality, 29, 687-694. |
| [43] | Lane P. and Lubatkin M. (1998), “Relative absorptive capacity and interorganizational learning”, Strategic Management Journal, Vol. 19 No. 5, pp. 461-77. |
| [44] | Levinson N.S. and Asahi M., 1995. Cross-national alliances and inter-organizational learning. Organizational Dynamics 24 (2), 50–63. |
| [45] | Lewin A. Y., Massini S. Peters C. (2010), Microfoundation of internal and external absorptive capacity routine. Organizational science, article in advance, 1 -18 |
| [46] | Lewin K (2010), Action Research and Minority Problems, Journal of Social Issues Volume 2, Issue 4, |
| [47] | Liu Z. And Lin P. (2004), Backward Linkages of Foreign Direct Investment - Evidence from China, Department of Economics, Lingnan University, Hong Kong |
| [48] | Lucas R. Jr. (1988), On the mechanics of economic development, Journal of Monetary Economics 22 (1988) 3-42. North-Holland |
| [49] | Lyles MA and Salk JE (1996) ‘Knowledge acquisition from foreign parents in international joint ventures: an empirical examination in the Hungarian context’, Journal of International Business Studies 29 (2): 154–174 |
| [50] | Mahnke V. M.L. Overby, J. Vang (2005) “Strategic Outsourcing of IT Services: Theoretical Stocktaking And Empirical Challenges,” Industry And Innovation,12(2)pp.205‐253 |
| [51] | Mangematin, V and Nesta L. (1999) What Kind of Knowledge can a Firm Absorb? International Journal of Technology Management 18, pp.149-172. |
| [52] | Mangematin, V. and Nesta, L., (1999) What Kind of Knowledge can a Firm Absorb? International Journal of Technology Management 18, pp.149-172. |
| [53] | Minbaeva D., Pedersen, T., Bjorkman I., Fey, C. and Park, H. (2003), “MNC knowledge transfer, subsidiary absorptive capacity and knowledge transfer”, Journal of International Business Studies, Vol. 34, pp. 586-99. |
| [54] | Minbaeva, D.B. "HRM Practices and MNC Knowledge Transfer” Personnel Review, vol. 34, no. 1, 2005. pp. 125-144. |
| [55] | Mowery D.C., and Oxley J.E. (1995) ‘Inward technology transfer and competitiveness: The role of national innovation systems, Cambridge Journal of Economics, 19: 16-93. |
| [56] | Mucchielli J. L. & Jabbour L. (2004), Technology Transfer through Backward Linkages: The Case of the Spanish Manufacturing Industry, The University of Paris I Panthéon-Sorbonne |
| [57] | Narula R. and Portelli B. Foreign Direct Investment and Economic Development: Opportunities and Limitations from a Developing Country perspective, Maastricht Economic Research Institute on Innovation and Technology April 2004 |
| [58] | Nelson R.R. and Winter, S. (1982). An evolutionary theory of economic change. Cambridge, MA: Belknap Press/Harvard University Press. |
| [59] | Nevis C., DiBella J, and Gould, M. (1995). Understanding organizations as learning systems. Sloan Management Review, Winter, 73-85. |
| [60] | Nonaka I. and Takeuchi H. (1995),The Knowledge Creating Company, Oxford University Press, New York |
| [61] | Parmigiani A. and Howard-Grenville J. 2011, "Routines revisited: Exploring the capabilities and practice perspectives", Academy of Management Annals, vol. 5, no. 1, pp. 413-453. |
| [62] | Paus E. and Gallagher K. (2006), The Missing Links between Foreign Investment and Development: Lessons from Costa Rica and Mexico, Working Paper No. 06-01, Global Development and Environment Institute, Tufts University GDAE |
| [63] | Peng, D.X., Schroeder, R.G., & Shah, R. (2008). Linking routines to operations capabilities: A new perspective. Journal of Operations Management, 26(6), 730–748. |
| [64] | Pfeffer J. (1981). Power in organizations. Marshfield, MA: Pitman. |
| [65] | Romer P. M. Increasing Returns and Long-Run Growth, The Journal of Political Economy, Vol. 94, No. 5. (Oct., 1986), pp. 1002-1037. |
| [66] | Rothwell R. and Dodgson, M. (1991) ‘Technology strategies in small firms’. Journal of General Management, 17:1, 45-55. |
| [67] | Sayek S. and Koymen S. (2009), the Role of Human Capital in Productivity Spillovers from FDI: An Empirical Analysis on Turkish Manufacturing Firms, Bilkent University |
| [68] | Sinkula J.M. (1994) "Market Information Processing and Organizational Learning" The Journal of Marketing, vol. 58, no.1, pp. 35-45. |
| [69] | Smallbone D. (2007), Foreign Direct Investment and SME Development: Some Policy Issues for Transition and Developing Countries, Kingston University, Surrey |
| [70] | Teece D. J. et al. (1997) "Dynamic capabilities and strategic management," Strategic Management Journal (18:7), pp. 509-533. |
| [71] | Thornton Derek, (2008), Is absorptive capacity significant for innovation at firm level? A study of the absorptive capacity of engineering and technology companies in the north west of Ireland, the National University of Ireland Galway |
| [72] | Van den Bosch, F.A.J., H.W. Volberda and M. de Boer. (1999), ‘Coevolution of Firm Absorptive Capacity and Knowledge Environment: Organizational Forms and Combinative Capabilities’, in: Organization Science, Vol. 10, Nr. 5 pp. 551-68 |
| [73] | Van Wijk J and Kwakkenbos H, (2012) Beer multinationals Supporting Africa’s Development?How Partnerships Include Smallholders into Sorghum-beer Supply Chains, Amsterdam University Press. |
| [74] | Vanhaverbeke W., Cloodt M. and Van de Vrande V. (2007), Connecting absorptive capacity and open innovation, Rotterdam Business School – the Netherlands |
| [75] | Vinding A.L., (2004) Human resources: absorptive capacity and innovative performance, in: Christensen, J.L., Lundvall, B.-Å., (eds.), Product Innovation, Interactive Learning and Economic Performance. Elsevier, Oxford. |
| [76] | Welsch H, Liao J and Stoica M (1997), absorptive capacity and firm responsiveness: an empirical investigation of growth-oriented firms, Department of Management DePaul University, Chicago |
| [77] | Zahra S.A. & George G. "Absorptive Capacity: A Review, Reconceptualization, and Extension " Academy of Management Review, vol. 27, no. 2, 2002. |
APA Style
Peter Lugemwa. (2014). Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries. International Journal of Economics, Finance and Management Sciences, 2(4), 245-256. https://doi.org/10.11648/j.ijefm.20140204.13
ACS Style
Peter Lugemwa. Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries. Int. J. Econ. Finance Manag. Sci. 2014, 2(4), 245-256. doi: 10.11648/j.ijefm.20140204.13
AMA Style
Peter Lugemwa. Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries. Int J Econ Finance Manag Sci. 2014;2(4):245-256. doi: 10.11648/j.ijefm.20140204.13
Share This Article
Twitter
Linked In
Facebook
Copy
Download@article{10.11648/j.ijefm.20140204.13,
author = {Peter Lugemwa},
title = {Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries},
journal = {International Journal of Economics, Finance and Management Sciences},
volume = {2},
number = {4},
pages = {245-256},
doi = {10.11648/j.ijefm.20140204.13},
url = {https://doi.org/10.11648/j.ijefm.20140204.13},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20140204.13},
abstract = {FDI has always been thought to affect the growth of local firms through technological spillovers and as such many developing countries have invested a lot to attract FDI. These spillovers can happen through FDI having backward, forward and horizontal linkages with local firms. Though in many countries FDI has contributed to the development of local firms, there is evidence to suggest that this is not always the case. There are instances where FDI has instead driven local firms out of business. The ability of local firms and more particularly SMEs to benefit from technological spillovers from TNCs is affected absorptive capacity. SMEs need absorptive capacity to in order to able to learn from TNCs. Absorptive capacity is usually proxied by the technology gap between the foreign and the domestic firms and in the case of large technology gap SMEs may not learn from TNCs. To support the linkages and spillovers between SMEs and TNCs the absorptive capacity of SMEs in developing countries can be nurtured though various Workforce Development programs and programs that would affect the human resource practices and organizational routines of SMEs.},
year = {2014}
}
TY - JOUR T1 - Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries AU - Peter Lugemwa Y1 - 2014/08/20 PY - 2014 N1 - https://doi.org/10.11648/j.ijefm.20140204.13 DO - 10.11648/j.ijefm.20140204.13 T2 - International Journal of Economics, Finance and Management Sciences JF - International Journal of Economics, Finance and Management Sciences JO - International Journal of Economics, Finance and Management Sciences SP - 245 EP - 256 PB - Science Publishing Group SN - 2326-9561 UR - https://doi.org/10.11648/j.ijefm.20140204.13 AB - FDI has always been thought to affect the growth of local firms through technological spillovers and as such many developing countries have invested a lot to attract FDI. These spillovers can happen through FDI having backward, forward and horizontal linkages with local firms. Though in many countries FDI has contributed to the development of local firms, there is evidence to suggest that this is not always the case. There are instances where FDI has instead driven local firms out of business. The ability of local firms and more particularly SMEs to benefit from technological spillovers from TNCs is affected absorptive capacity. SMEs need absorptive capacity to in order to able to learn from TNCs. Absorptive capacity is usually proxied by the technology gap between the foreign and the domestic firms and in the case of large technology gap SMEs may not learn from TNCs. To support the linkages and spillovers between SMEs and TNCs the absorptive capacity of SMEs in developing countries can be nurtured though various Workforce Development programs and programs that would affect the human resource practices and organizational routines of SMEs. VL - 2 IS - 4 ER -
Email: