Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries

Peter Lugemwa

doi:doi:10.11648/j.ijefm.20140204.13

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Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries

Peter Lugemwa

Published in International Journal of Economics, Finance and Management Sciences (Volume 2, Issue 4)

Received: 29 May 2014 Accepted: 5 August 2014 Published: 20 August 2014

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Abstract

FDI has always been thought to affect the growth of local firms through technological spillovers and as such many developing countries have invested a lot to attract FDI. These spillovers can happen through FDI having backward, forward and horizontal linkages with local firms. Though in many countries FDI has contributed to the development of local firms, there is evidence to suggest that this is not always the case. There are instances where FDI has instead driven local firms out of business. The ability of local firms and more particularly SMEs to benefit from technological spillovers from TNCs is affected absorptive capacity. SMEs need absorptive capacity to in order to able to learn from TNCs. Absorptive capacity is usually proxied by the technology gap between the foreign and the domestic firms and in the case of large technology gap SMEs may not learn from TNCs. To support the linkages and spillovers between SMEs and TNCs the absorptive capacity of SMEs in developing countries can be nurtured though various Workforce Development programs and programs that would affect the human resource practices and organizational routines of SMEs.

Published in	International Journal of Economics, Finance and Management Sciences (Volume 2, Issue 4)
DOI	10.11648/j.ijefm.20140204.13
Page(s)	245-256
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Foreign Direct Investment, SME Growth, Absorptive Capacity

References

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APA Style

Peter Lugemwa. (2014). Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries. International Journal of Economics, Finance and Management Sciences, 2(4), 245-256. https://doi.org/10.11648/j.ijefm.20140204.13

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Peter Lugemwa. Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries. Int. J. Econ. Finance Manag. Sci. 2014, 2(4), 245-256. doi: 10.11648/j.ijefm.20140204.13

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AMA Style

Peter Lugemwa. Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries. Int J Econ Finance Manag Sci. 2014;2(4):245-256. doi: 10.11648/j.ijefm.20140204.13

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@article{10.11648/j.ijefm.20140204.13,
  author = {Peter Lugemwa},
  title = {Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {2},
  number = {4},
  pages = {245-256},
  doi = {10.11648/j.ijefm.20140204.13},
  url = {https://doi.org/10.11648/j.ijefm.20140204.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20140204.13},
  abstract = {FDI has always been thought to affect the growth of local firms through technological spillovers and as such many developing countries have invested a lot to attract FDI. These spillovers can happen through FDI having backward, forward and horizontal linkages with local firms. Though in many countries FDI has contributed to the development of local firms, there is evidence to suggest that this is not always the case. There are instances where FDI has instead driven local firms out of business. The ability of local firms and more particularly SMEs to benefit from technological spillovers from TNCs is affected absorptive capacity. SMEs need absorptive capacity to in order to able to learn from TNCs. Absorptive capacity is usually proxied by the technology gap between the foreign and the domestic firms and in the case of large technology gap SMEs may not learn from TNCs. To support the linkages and spillovers between SMEs and TNCs the absorptive capacity of SMEs in developing countries can be nurtured though various Workforce Development programs and programs that would affect the human resource practices and organizational routines of SMEs.},
 year = {2014}
}

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TY  - JOUR
T1  - Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries
AU  - Peter Lugemwa
Y1  - 2014/08/20
PY  - 2014
N1  - https://doi.org/10.11648/j.ijefm.20140204.13
DO  - 10.11648/j.ijefm.20140204.13
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
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AB  - FDI has always been thought to affect the growth of local firms through technological spillovers and as such many developing countries have invested a lot to attract FDI. These spillovers can happen through FDI having backward, forward and horizontal linkages with local firms. Though in many countries FDI has contributed to the development of local firms, there is evidence to suggest that this is not always the case. There are instances where FDI has instead driven local firms out of business. The ability of local firms and more particularly SMEs to benefit from technological spillovers from TNCs is affected absorptive capacity. SMEs need absorptive capacity to in order to able to learn from TNCs. Absorptive capacity is usually proxied by the technology gap between the foreign and the domestic firms and in the case of large technology gap SMEs may not learn from TNCs. To support the linkages and spillovers between SMEs and TNCs the absorptive capacity of SMEs in developing countries can be nurtured though various Workforce Development programs and programs that would affect the human resource practices and organizational routines of SMEs.
VL  - 2
IS  - 4
ER  -

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Peter Lugemwa

Faculty of Business Administration and Management, Uganda Martyrs University, Nkozi, Uganda

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APA Style

Peter Lugemwa. (2014). Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries. International Journal of Economics, Finance and Management Sciences, 2(4), 245-256. https://doi.org/10.11648/j.ijefm.20140204.13

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ACS Style

Peter Lugemwa. Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries. Int. J. Econ. Finance Manag. Sci. 2014, 2(4), 245-256. doi: 10.11648/j.ijefm.20140204.13

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AMA Style

Peter Lugemwa. Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries. Int J Econ Finance Manag Sci. 2014;2(4):245-256. doi: 10.11648/j.ijefm.20140204.13

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@article{10.11648/j.ijefm.20140204.13,
  author = {Peter Lugemwa},
  title = {Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {2},
  number = {4},
  pages = {245-256},
  doi = {10.11648/j.ijefm.20140204.13},
  url = {https://doi.org/10.11648/j.ijefm.20140204.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20140204.13},
  abstract = {FDI has always been thought to affect the growth of local firms through technological spillovers and as such many developing countries have invested a lot to attract FDI. These spillovers can happen through FDI having backward, forward and horizontal linkages with local firms. Though in many countries FDI has contributed to the development of local firms, there is evidence to suggest that this is not always the case. There are instances where FDI has instead driven local firms out of business. The ability of local firms and more particularly SMEs to benefit from technological spillovers from TNCs is affected absorptive capacity. SMEs need absorptive capacity to in order to able to learn from TNCs. Absorptive capacity is usually proxied by the technology gap between the foreign and the domestic firms and in the case of large technology gap SMEs may not learn from TNCs. To support the linkages and spillovers between SMEs and TNCs the absorptive capacity of SMEs in developing countries can be nurtured though various Workforce Development programs and programs that would affect the human resource practices and organizational routines of SMEs.},
 year = {2014}
}

Copy | Download

TY  - JOUR
T1  - Foreign Direct Investment and SME Growth: Highlighting the Need for Absorptive Capacity to Support Linkages between Transnational Corporations and SMEs in Developing Countries
AU  - Peter Lugemwa
Y1  - 2014/08/20
PY  - 2014
N1  - https://doi.org/10.11648/j.ijefm.20140204.13
DO  - 10.11648/j.ijefm.20140204.13
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 245
EP  - 256
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20140204.13
AB  - FDI has always been thought to affect the growth of local firms through technological spillovers and as such many developing countries have invested a lot to attract FDI. These spillovers can happen through FDI having backward, forward and horizontal linkages with local firms. Though in many countries FDI has contributed to the development of local firms, there is evidence to suggest that this is not always the case. There are instances where FDI has instead driven local firms out of business. The ability of local firms and more particularly SMEs to benefit from technological spillovers from TNCs is affected absorptive capacity. SMEs need absorptive capacity to in order to able to learn from TNCs. Absorptive capacity is usually proxied by the technology gap between the foreign and the domestic firms and in the case of large technology gap SMEs may not learn from TNCs. To support the linkages and spillovers between SMEs and TNCs the absorptive capacity of SMEs in developing countries can be nurtured though various Workforce Development programs and programs that would affect the human resource practices and organizational routines of SMEs.
VL  - 2
IS  - 4
ER  -

Copy | Download