South–South production and knowledge linkages – an exploratory study based on cases from Malaysia

Abstract

This study explores linkages developed by firms from Malaysia when investing in other emerging or developing economies – also known as South–South Linkages. The interest is what production and knowledge networks that are emerging and how these links or networks developed help the firms in terms of capability development and innovation. In addition to linkages, we relook at what drives the firms and the organization forms to invest abroad. Findings from the cases indicate that while the drivers for internationalization or outward foreign direct investment by Malaysian firms are essentially market seeking, the role of supportive government policies is a critical external driver. There is also clear understanding by the organizations that the move to emerging/developing economies needs a long-term strategy for realization of benefits. In terms of South–South linkages, they can be seen in two phases – one is the linkages developed for the move into emerging/developing economies and second phase is the linkages developed for doing business in the new location. The study shows that the linkages are still vertical with suppliers and parent companies and there are very little horizontal linkages. What is interesting is the implications for innovation.

Keywords:

• South–South linkages
• production and knowledge networks
• capability and innovation development
• emerging economy firms OFDI
• Malaysia

Notes

1 These investment are usually for further investments.