The mirage of upgrading local automotive parts suppliers through the creation of vertical linkages with MNEs in developing economies
Critical Perspectives on International Business
ISSN: 1742-2043
Article publication date: 6 July 2015
Abstract
Purpose
This paper aims to explore inter-organizational linkages and the extent of technology transfer and develop propositions related to the linkages, technology transfer and upgrading of local suppliers in developing economies.
Design/methodology/approach
The authors conduct a literature review and 50 exploratory interviews with senior managers and policymakers in the automotive parts industry of Pakistan.
Findings
The data revealed that three major international joint ventures (IJVs) established in the automotive industry of Pakistan have created significant vertical linkages. However, advanced high-level technology transfer has not actually taken place due to the following reasons: IJV parents are reluctant to engage in technology transfer, there is limited support from local government and local suppliers exhibit limited improvement in their innovation capability. The vertical linkage creation and low-medium technology transfer contributes to incremental product upgrading of the local suppliers, rather than their process upgrading and insertion into the global value chain (GVC).
Research limitations/implications
This research looked at technology interactions between IJVs and local tier-1 suppliers (not tier 2 and tier 3) in Pakistan’s automotive industry. This paper’ illustrative case indicates what is required for local suppliers in developing economies to make breakthrough upgrades of their products and processes through their vertical linkages with foreign-owned indigenous firms.
Originality/value
Unlike prior research, the authors investigate the role of inter-organizational linkages and the extent of technology transfer, and how these affect local suppliers’ product/process upgrading in the local value chain. Highlighting the illusion of upgrading in the GVC, this paper reveals the difficulties involved in upgrading suppliers’ positions (e.g. insertion and functional upgrading in the GVC) through their vertical linkages with foreign multinational enterprises in developing economies. The illusion of upgrading sheds a rather disappointing light on the position of developing country supplier vis-à-vis their powerful international partners.
Keywords
Citation
Khan, Z., Lew, Y.K. and Sinkovics, R.R. (2015), "The mirage of upgrading local automotive parts suppliers through the creation of vertical linkages with MNEs in developing economies", Critical Perspectives on International Business, Vol. 11 No. 3/4, pp. 301-318. https://doi.org/10.1108/cpoib-12-2012-0064
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited