Many literatures have been studied in detail about the impacts of MNEs on host economies such as existing theoretical models which were developed by Markusen and Venables (1999) and Lin and Saggi (2005) and numerous empirical studies which were conducted by Belderbos, Capannelli & Fukao, 2001; Driffield & Noor, 1999; Gorg & Ruane, 2001; McAleese & McDonald, 1978; O'Farrell & O'Loughlin, 1981; Turok, 1993; UNCTAD, 2001… However, up to now, there has been no research of the potentially beneficial impact of multinational corporations on their local suppliers through transfer of knowledge and technology in the specific case of Vietnam (Assignment case study, page 160), existing studies on transition economies focus mainly on Eastern European countries. For example, Javorcik (2004) analyses the spillovers from FDI through vertical linkages in Lithuania or Lorentzen, Mollgaard and Rojec (2003) study technology transfer in the automotive industry in Poland, the Czech Republic, Hungary, Romania… Because of this, the study of the impact of FDI flows in a transition economy such as Vietnam will provide very useful insights into foreign firms' relations with local suppliers.
With firm-level data collected in Malaysia and Vietnam, the paper analyzed the presence of technology and knowledge transfer between multinational firms and their local suppliers as well as compared the experience of the two countries with foreign direct investment flows. From this, many valuable lessons can be drawn for Vietnam in terms of economic development.
This study focused on two objectives: to demonstrate the potential for knowledge transfer between multinationals and their suppliers in both Malaysia and Vietnam; and through Malaysia's valuable experiences to find out suitable solutions so as to maximize beneficial linkages from MNEs for Vietnam.
Through detailed studies with many specific and clear examples as well as good references, the paper gave also four angles:
1. There is potential for knowledge and technology transfer from foreign affiliates based in Malaysia and Vietnam to their local suppliers.
2. The nature of the relationship between foreign affiliates and their suppliers changes over time.
3. Because Vietnam is a transition economy, there is a difference in the level of knowledge and technology transfer from MNEs depending on whether they are located in Malaysia or Vietnam.
4. MNEs' knowledge and technology transfer to local suppliers contribute to the improvement of local suppliers' capabilities (Assignment case study, page 162 - 163).
2. SUMMARY
This research aimed in order to indicate the advantages of knowledge and technology transfer from MNEs to local suppliers in both Malaysia and Vietnam, and the lessons could be learnt from Malaysia to maximize beneficial linkages for Vietnam from MNEs.
Firstly, by collecting and analyzing of sample characteristics in the electronics/ electrical sector and the textiles and garment sector in both Malaysia and Vietnam (2002), Axèle Giroud (2007) examined the activities performed by multinational firms as well as assessed vertical linkages which were established in the host economy (page 163). Through these sample characteristics, as we can see from the paper, it's very easy to recognize that MNEs in Malaysia has been established and operated in longer time and therefore the multinational corporations often are larger in size and more wholly owned compared to those in Vietnam. As a result, the mean level of local sourcing of material inputs of Malaysia also was higher than Vietnam's, specifically just over a third of total sourcing in Malaysia and one-fifth in Vietnam (page 165).
Not only collecting and analyzing of sample characteristics, but also Axèle Giroud studied a empirical methodology of Crone and Roper (2001, page 539) and used a five-point rating scale (Assignment case study, page 166). Based on sample characteristics and the empirical study's results, the author confirmed that:
Proposition 1: MNES engage in a wide range of activities that facilitate the transfer of knowledge to suppliers through standard material/ components with physical or technological specifications about the inputs purchased.
Proposition 2: Knowledge transfer activities have changed in nature over time. For example, in the case of Malaysia (1996 and 2002), transferring of production processes or taking part in designs of inputs grows more and more, in joint settlement of operations requirement of local suppliers as well… (Assignment case study, page 168). Over time, these changes occurred because local suppliers' capabilities have improved very clearly.
Proposition 3: only partly: "interactions between foreign affiliates and their local suppliers are less developed in Vietnam than they are in Malaysia, but the difference in the type knowledge transferred is not country- specific." (Assignment case study, page 168).
Proposition 4: MNEs' knowledge and technology transfer to local suppliers has contributed to the improvement of local suppliers' capabilities especially about cost, quality and delivery (Assignment case study, Table 3, page 169).
Secondly, through comparing MNEs supply activities in Malaysia and Vietnam, Axèle Giroud (2007) pointed out that locally-owned suppliers in Vietnam do not yet much benefit from the superior knowledge and technology transfer of MNEs to the same extent as those in Malaysia. The main reasons of this issue are: Firstly, joint-ventures are fostered as an entry mode especially with state-owned enterprises when these foreign firms invest into Vietnam. Corollary of this will create an imbalance in favor of SOEs as business partners for foreign enterprises. An additional cause of this trend is that Vietnam's innovation policies and international trade agreements (Doi Moi policy in the late 1980, WTO's membership from January, 11th 2007…) were initiated later than Malaysia's therefore Vietnam's FDI experience is shorter and less effective. A final factor is that "some decisions taken by the Vietnamese government in the past have slowed the development of a strong private sector. Resources have been dedicated to the strengthening of the state-owned sector, sometimes to the detriment of private firms. Private firms have found access to finance difficult, restraining their capacity to develop and expand. The lack of a solid national system of innovation has had consequences for technology development in these local suppliers" (Assignment case study, page 172) also are one of these reasons. And consequently, all of these reasons act as a disincentive for MNEs to develop programs that would raise the level of service and quality of local firms.
In addition, with sample data about affiliates' characteristics in Malaysia in 1996 and those of Vietnam in 2002, Axèle Giroud (2007) also showed very important differences relative to the export-orientation, the ownership structure and the size and emphasized that "unless Vietnam drastically reforms its competitive environment, the potential for linkage development will remain insufficient" (Assignment case study, page 172).
So as to solve these issues and maximize beneficial linkages from MNEs for Vietnam, Axèle Giroud gave some solutions as follows:
1. Developing further the domestic supply industry and specifically the private sector (Assignment case study, page 173).
2. Typical Vietnamese economic and political systems need to be studied carefully in order to design effective promotion programs of vertical linkages.
3. Soft policy provisions, whereby MNEs are not operating under obligatory regulations, but rather are encouraged to conduct business in a particular manner, such as those are accepted in Malaysia.
4. A competitive environment as well as local firms' capabilities in Vietnam must be created and enhanced by suitable policies for both SOEs and SOEs. Beside that, supporting businesses and fostering the creation of new industries, and new companies, promoting private investment (in fixed assets, R&D and training) in order to consolidate the foundation of the competitiveness of local firms must be done as sooner as better.
3. JUDGEMENTS
3.1. Demonstrating the potential for knowledge and technology transfer between MNEs and their suppliers in both Malaysia and Vietnam
Through empirical studies focusing on case studies and firm-level data, Axèle Giroud gave four propositions and step by step proved these four propositions by sample characteristics and empirical methodologies very logical and clearly to indicate that knowledge and technology transfer from MNEs to local suppliers is real and it has changed in nature over time although there is a difference in the level of knowledge and technology transfer from MNEs.
3.2. Providing valuable solutions for Vietnam, a country in transition
This research's results showed that Vietnam's policies and decisions which is late, wrong and not suitable is main causes not to attract FDI flows and in contrast acts as barriers for MNEs to develop programs that would increase the level of quality and service of local firms. "The potential for linkage development will remain insufficient, unless Vietnam drastically reforms its competitive environment."(page 172).
On the other hand, the research also provided useful avenues for Vietnam to remedy these causes. Especially, developing further the local supply industry and specifically the private sector, soft policy provisions, whereby MNEs are not operating under obligatory regulations, but rather are encouraged to conduct business in a particular way and a fair competitive environment for both SOEs and non-SOEs to improve their capabilities as well… These suggestions generally can apply to other transition economies however contextually specific conditions and policies need to be consider carefully.
3.3. Paradigm and Design
The paper is carried out in order to solve orientation problems then to adjust and point out rational explanations. The data used in this paper is part of a bigger study (see Mirza et al., 2003). To analyze and assess the objectives of the research, both quantitative and qualitative paradigms were combined in the Axèle Giroud's research.
The epistemology basis of this study relies on the existing theoretical models (Markusen and Venables (1999) and Lin and Saggi (2005)) to assume that MNEs have positive effects on the development of local firms through the creation of vertical linkages in both Malaysia and Vietnam.
Ontologically, although the data used in this paper were not perfect, but showed that knowledge and technology transfer from MNEs to local suppliers is real and it will contribute to the improvement of local supplier's capabilities. Furthermore, vertical linkages between foreign affiliates and their local suppliers also will evolve over time and the difference in the type knowledge transferred is not country specific.
With the means and scope of this particular research, the author used a cross sectional design adopted by Crone and Roper (2001, p.539) to measure the stock of knowledge in a foreign affiliates by investigating the transfer of many different production, managerial or organizational methods.
The paper has specific objectives and a clear structure with together detail examples and explanations because it is very easy to understand for who wants to study it.
3.4. Methods
Data collection method: In the Axèle Giroud's (2007) research, we can see that data is selected very carefully (For example, A semi-structured questionnaire to interview managers in both Malaysia and Vietnam from the part of a bigger study (see Mirza et al., 2003) or empirical methodology by Crone and Roper…), and arranged very scientifically from sample characteristics of MNEs in Maylaysia and Vietnam (page 164), percentage of multinational economies with frequent knowledge transfer to their suppliers (page 167) to perceived impact of MNEs' knowledge transfer on their local suppliers (page 169).
Evaluation method: The author compared the activities of multinationals through using of comparative case studies in both Malaysia and Vietnam.
The context, the mechanism and the framework through making propositions were clearly mentioned. Notably, two pillar industrial sectors in Malaysia and Vietnam were analyzed and a semi-structured questionnaire was used to interview in both countries. This mechanism is explained further with the using T-test, Anova test and a five-point rating scale.
4. CONCLUSION
The author successfully obtained two objectives: demonstrating the potential for knowledge and technology transfer between multinational and their suppliers in Malaysia and Vietnam through studying existing theoretical models developed by Markusen and Venables (1999) and Lin and Saggi (2005) as well as collecting and analyzing firm-level data from a bigger study of Miza, 2003; and depending on this discussion so as to suggest avenues to maximize beneficial linkages from MNEs for Vietnam.
In addition, with the results in Giroud's research, he also came to conclusion that local suppliers in Vietnam do no yet benefit from transfer activities of MNEs like those in Malaysia. Through comparison with Malaysia, the study provided useful lessons that Vietnam can be learnt in order to achieve beneficial linkages from MNEs for development of the economy and apply to other transition economies. For instance, developing further the local supply industry and specifically the private sector or soft policy provisions, whereby multinational enterprises are not operating under mandatory regulations, but rather are encouraged to conduct business in a particular way…
