1. INTRODUCTION
Linkages between multinational enterprises (MNEs) and local suppliers in host countries have attracted a larger number of scholars and policy makers for its significant role in transferring knowledge to local suppliers and supporting the economic development of the host countries. There are many studies on this topic. One of them is the research tilted "MNEs vertical linkages: The experience of Vietnam after Malaysia", by Axèle Giroud (2007). This research evaluates the existence of technology and knowledge transfer from MNEs to local suppliers by using collected data from multinational subsidiaries and compares the experience in both Vietnam and Malaysia. In order to review critically this study, the paper is divided into five main parts: (i) Project Rationale; (ii) Literature Review; (iii) Paradigm and Design; (iv) Methods; and (v) Results and Presentation.
2. CRITIQUES
2.1. Project Rationale
The research rationale, problems, objectives, aims and hypotheses will be identified in this part.
Vertical linkages between multinational enterprises (MNEs) and local suppliers in host developing countries have received much attention from researchers and policy makers because of its bilateral benefits for not only local suppliers, but also the host countries. One of the impacts of MNEs on host economies is knowledge transfer. Although a great deal of researches about the impacts of MNEs on the host economies have been carried out since 1960s, to date there has been no investigation of the potentially beneficial impact of MNEs on local suppliers through transfer of knowledge and technology in Vietnam (p.160). The author makes right decision when choosing Malaysia to compare with Vietnam. Malaysia is a neighboring country with the same regional group (ASEAN) as Vietnam but having beneficial linkages and more experience in FDI. Thus, Vietnam can withdraw some lessons from Malaysia in this respect.
In the research, the author indicates two-fold: "to to demonstrate the potential of knowledge and technology transfer from MNEs to local suppliers in both Malaysia and Vietnam; and base on this discussion to propose the way for Vietnam to maximize beneficial linkages from multinationals" (p.159). To achieve these objectives, the author attains research aims specifically. The first one is to examine the existence and circumstance behind the transfer of knowledge and technology from MNEs to their suppliers in both Malaysia and Vietnam. The author chooses two sectors in which multinational firms operate to study. They are electronics/electrical sector and textiles/garment sector. The author is right because the two sectors are recipient to a substantial share of FDI in both Malaysia and Vietnam and they are pillars in the economies of countries across Southeast Asia. To assess the existence of transfer of knowledge, the research was implemented by measuring the stock of knowledge in a foreign subsidiary by investigating the transfer of various advanced production, managerial or organizational methods. The second aim is to point out the positive impact of MNEs vertical linkages and its benefit for local suppliers. To demonstrate this, the author shows the perceived impact of MNEs' transfer knowledge on indigenous suppliers. The author also compares MNEs supply activities in Malaysia and Vietnam. Therefore, Vietnam could learn from the Malaysian case and take advantage of beneficial linkages from MNEs.
In terms of hypotheses, there are four hypotheses presented in the research:
- Multinationals have positive effects on the development of indigenous firms through the creation of vertical linkages and sourcing of intermediate products locally
- The multinational technology is superior to that of its competitors.
- The prospect of technology transfer from MNEs to local firms enhances further the positive impact on host countries.
- The improvement of the supplier's capabilities as a result of the interaction with their foreign customers in the fourth part, Empirical Methodology.
To make these hypotheses above clearer, the author gives the four propositions and tries to answer in afterward parts of the research. They are:
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 and Vietnam.
4. MNEs' knowledge and technology transfer to local suppliers contribute to the improvement of local suppliers' capabilities.
2.2. Literature Review
An extensive review of literatures was conducted by Axèle Giroud on the research.
The theoretical structure of the literature is very clear. In order to make readers understand easily and make the research more convincing, Giroud has brought up clear concepts and theories related to this area with detailed references. For instance, by reviewing literatures of Blomstrom et al (2000), UNCTC (1981) the researcher provided two common types of MNEs linkages, which are vertical (backward) and horizontal (forward). The author also pointed out the first concept of linkages and its theories with clear reference: "Vertical linkages represent the relations established with supplier firms, whereas forward linkages comprise relations established with business customers in the host economy. The concept of linkages was first established by Hirschman (1958), then used in firm-level studies (Lall, 1996; Lim & Fong, 1982)." In addition, the research indicates previous findings as well as studies of other researches relevant to it. The studies of Gorg & Ruane (2000) about positive effects of linkages on the firms with regard to the knowledge and technology transfer are also found in Crone & Roper (2001), Invarsson & Alvstam (2005), Lim & Fong (1982), and UNCTAD (2001). The author has also conducted a depth review of benefits from the vertical linkages for MNEs through Blalock & Gertler (2003) and for local suppliers through Ivarsson and Hobday (1995), Rodriguez Clare (1996), Alvstam (2005). Apart from theoretical knowledge on concepts and other relevant issues about the relationship between MNEs and their local suppliers, the study was also conducted with an extensive review on the difference between MNEs' supply relation in Vietnam and Malaysia (UNCTAD, 1998 and Giroud, 2005).
In terms of research gaps, the author identified successfully the gaps of previous findings. That is the study of linkages has not been integrated fully within the theoretical strands of multinationals' activities. Moreover, to date there has been no investigation of the potentially beneficial impact of MNEs on local suppliers through transfer of knowledge and technology in the specific case of Vietnam although there were many empirical studies about MNEs vertical linkages and their impacts on specific industries. In this aspect, existing studies on transition economies only focus on Eastern European countries.
In conclusion, the author has conducted a good literature review. The research covers lots of issues with clear reference. The only problem is that readers may mislead and not rely on some outdated data in more than 20 years ago such as Lim & Long (1982) and UNCTC (1981).
2.3. Paradigm and Design
The overall approach of the research is "Realism" with a tendency towards "positivism", which is to make hypotheses based on facts from literature review and tries to demonstrate these hypotheses by analyzing results of the survey research and case study conducted (Alan Bryman and Emma Bell, 2007). The research is carried out in order to test hypotheses so it is deductive (Alan Bryman and Emma Bell, 2003). It is objective research because data is collected from official sources. For analyzing data, the author used Bivariate and multivariate analysis in order to analyse quantitative data from survey research and case study.
The researcher used a "mixed methodology" approach (Bryman and Bell, 2007), combining "quantitative" methodology and "qualitative" methodology. For the "quantitative" methodology, the research was conducted a "survey research" (Bryman and Bell, 2007). To examine the activities performed by multinational firms and evaluate vertical linkages established in the host economy, the author started a survey with semi-structured questionnaire to interview 49 managers of MNEs in Malaysia and Vietnam in 2002 (Mirza et al, 2003). For the "qualitative" methodology, in order to evaluate the existence of the transfer of knowledge and technology from MNEs to their suppliers in both Malaysia and Vietnam the research adopted methodological approach (Crone and Roper 2001, p.539) by measuring the stock of knowledge in foreign subsidiary through investigating the transfer of various advanced production, managerial or organizational methods. In addition, another qualitative method has been conducted through an interview with managers about their perceptions on how suppliers had improved as a result of dealing with their firms, using five-point rating scale (ranging from "significant improvement" to "no improvement at all") to assess the improvement of local suppliers and measuring the impact of knowledge transfer activities on the capabilities of these firms.
In terms of design, this author used a cross-sectional research design because the research date is collected in on more than one case (MNEs in Malaysia and MNEs in Vietnam) and at a single point in time (2002) in order to collect a body of quantitative or quantifiable data in connection with two or more variables, which are then examined to detect patterns of association (Bryman and Bell, 2007). The researcher also employed a "comparative case study" (Bryman and Bell, 2007), with two group of electronics/electronical or textiles/garment multinational firms in Malaysia in 1996 and 2002 to clearly define the nature of the relationship between MNEs' affiliates and their local suppliers' changes overtime. This case study includes a longitudinal research carried out by different researchers, the author of the research Giroud with the research in 2002 and the author of multinational firms with an earlier study in 1996.
2.4. Methods
Axèle Giroud (2007) has used a variety of methods to collect data and analyse them. Examining the activities performed by multinational firms and evaluating vertical linkages established in the host economy, the author used a chain of secondary data from a bigger study (Mirza et al., 2003). A semi-structured questionnaire was used to interview managers in Malaysia and Vietnam. This study includes interviews in a total of 113 companies across ASEAN, from "pure" regional headquarters (RHQ) firms with no manufacturing activities to indigenous firms. The core of the analysis relied upon information collected through interviews among 88 manufacturing companies in the five host countries. Of these companies, 49 cases are presented in this research, focusing on Malaysia and Vietnam. Additionally, the author used other secondary sources such as data representing percentage of MNEs with frequent knowledge transfer to their suppliers and data extracted from ASEAN Statistical Yearbook 2005 to show the percentage of key source investing countries. Alternatively, to measure and assess the impact of knowledge transfer activities on the capabilities of local suppliers, the researchers also used the primary data by conducting an interview with managers about their perceptions on how suppliers had improved as a result of dealing with their firms, using five-point rating scale (ranging from "significant improvement" to "no improvement at all"). However, the author recognized the limitation of this method and acknowledged that a detailed analysis of individual suppliers would provide a more objective and accurate assessment about the impact of MNEs on suppliers.
With regard to the research samples, non-probability technique was used by designing convenience sample (managers of companies in both Malaysia and Vietnam) as the basis for their questionnaire survey and the case study. However, the collected data is not highly reliable because only 49 companies participated in the survey. The statistics and data were cited from a bigger and more reliable study (Mirza et al, 2003) with a total of 113 companies interviewed across ASEAN. Hence, the reliability of the research can be acceptable. In addition, the author used secondary nature of data so the researchers can replicate the study more easily. In other words, this topic could be repeated by any scholars in a different approach in the future. In review of two types of sample in the research, which are electronics/electronical and textiles/garment multinational sectors in Malaysia and Vietnam, the issue of validity needs to be considerable and in some way does not meet the research's requirements. Two sectors above in the two countries are incommensurable. Whilst Electronics and electrical industry has experienced a faster growing than Textile and Garment industry in Malaysia for many years, the two sectors have been in a contrary situation in Vietnam. For that reason, to a certain extent, the indicator of data collection in the research hardly possesses the quality of being sound or true as far as can be judged.
In terms of Data analysis, Axèle Giroud used the Bivariate analysis and multivariate analysis, which refers to the analysis of two variables and three or more variables, respectively, "at a time to uncover whether or not the two variables are related" (Alan Bryman and Emma Bell, 2007), in order to analyse quantitative data from survey research and case study. Among a variety of techniques available in bivariate analysis, contingency tables are used to design all three tables in this research for their most flexibility and possibility to employ in relation to any pair of variables (Alan Bryman and Emma Bell, 2007). These tales are also regarded as kind of descriptive statistics for only containing figures referring to mode, frequency and percentage other than inferential statistics with complex mathematics formulations.
As regards impact and access issue, the collected data is all public and from official organization as well as other's researchers. Therefore, the research does not break the ethical principles.
2.5. Results and Presentation
The author successfully obtain the objectives of this study that is to indicating the existence of the knowledge and technology transfer from MNEs to their suppliers in both Malaysia and Vietnam; and on the basis of this discussion to make positive recommendations for Vietnam to take advantage of beneficial linkages from MNEs. With reliable evidence, the research shows that locally-owned suppliers in Vietnam do not yet benefit from foreign firm's superior technology and managerial expertise to the same extent as those in Malaysia. Levels of backward linkages remain small, and little knowledge is being shared by foreign firms with local suppliers. The research provides helpful suggestions for Vietnam to maximize beneficial linkages from MNEs to development the economy and generally apply to other transition economies.
The research is presented with clear framework. The research clearly provides sufficient information such as the objectives, scope of the research, results, methods and suggestion. The author also supplied relevant concepts as well as studies of other researchers. He also gave clear explanation and reliable data. The way to collect and analyse data would enable other scholars and researchers to replicate the study more easily. In a nut shell, the research is well-organized.
3. CONCLUSION
In conclusion, the research confirms the beneficial potential for knowledge transfer between MNEs and their local suppliers in host developing and to the extent that this research is substantial exploratory. The study encourages the improvement of vertical linkages between MNEs-local suppliers in Vietnam as well as provides some value lessons for Vietnam in order to enhance this relationship in the future. In the context of globalization, the research has made a considerable contribution to Vietnam, a transitional economy which still needs more knowledge and experience in improving and managing a variety of FDI into the country.
