Inter‐firm linkages and regional impact of transnational corporations: company case studies from shanghai, china

Abstract

By undertaking two company case studies in Shanghai, this article reveals that the actual regional impact of direct investment from TNCs is much greater than FDI data themselves may indicate. Such impact extends far beyond foreign invested enterprises (FIEs) as well as the invested regions. The joint venture with the local side controlled by a regional government tends to have fewer suppliers from other regions than the other with the local side owned by a state ministry. Through the extensive linkage networks with FIEs, industrial growth, technology transfer, management improvement and job creation have been indeed spread over many domestic enterprises. The government in the relevant region should employ proper measures to develop these linkages, especially in regions that have difficulties in attracting TNC investment. The two companies studied mirror the general situation in the automotive and the electronics industries, respectively. Further study on the indirect supply linkages with FIEs appears inviting.