Foreign and domestic multinationals’ linkages in advanced, small open economies: do foreignness, regional origin and technological capability matter?

Abstract

Purpose

International business theory suggests that multinational enterprises (MNEs) seek to internalise resources embedded in local firms to complement their own through inter-organisational relationships, yet little is known about whether and how these business linkages differ between foreign (F)MNEs and domestic (D)MNEs. This paper aims to explore the linkage differential between DMNEs and FMNEs operating in the same single-country contexts and to examine whether foreignness, regional origin and technological capability make a difference.

Design/methodology/approach

This study is based on a unique firm-level data set of 292 MNEs located in five advanced, small open economies (SMOPECs). This study analyses the benefit received – in the form of technical and organisational resources and knowledge – by DMNEs and FMNEs via backward, forward and collaborative linkages with local business partners.

Findings

Our research finds FMNEs benefit less from linkages than DMNEs; and FMNEs originating from outside the region especially so. However, the results also show technological capability mitigates this difference and is thus a game changer for FMNEs from outside the region.

Originality/value

This paper differentiates between FMNEs and DMNEs in their propensity to benefit from resources received from different local partners and explores the influence of regional origin and technological capability. Despite the advanced and internationally oriented nature of SMOPECs, DMNEs still gain more benefit, suggesting either liabilities of foreignness and outsidership persist, or FMNEs do not desire, need or nurture local linkages.