Multi-national enterprise (MNE) is an organization which has divisions in many countries and trades globally. Due to the globalization and international trade, multinational corporate appeared and developed quickly and the worldwide economy is important. According to Ghoshal and Bartlett (1990:603)… “A multinational corporation consists of a group of geographically dispersed”.
As a result, the paper is about Giroud, A. (2007) on “MNEs vertical linkages: The experience of Vietnam after Malaysia” and it is going to be analyzed according to five points:
Paradigm and design
Results and presentation
2.1 Project rational:
Recognizing the globalization and international trade, the multinational enterprises vertical linkages has been appeared and developed quickly, especially on the host economies as Vietnam. However, Vietnam has not experiences and activities of MNEs vertical linkages. Thus, in the article, Giroud, A. (2007) clearly defines the research topic that is to focus on multinational enterprise backward linkages and specific example is the experience of Vietnam after Malaysia. Then the research objectives are to demonstrate the potential for knowledge transfer between multinationals and their suppliers in both Malaysia and Vietnam; and to build upon this discussion to suggest avenues for Vietnam to maximize beneficial linkages from MNEs. The research also assesses the existence and circumstance behind the transfer of knowledge and technology from MNEs to their suppliers in both Vietnam and Malaysia. Additionally, the article aims to present the scope for knowledge exchange between foreign affiliates and their local suppliers, as this determines the potential learning and acquisition by local firms and thus enhances the positive outcome of MNEs’ activities in host developing economies. It is to compare MNEs supply activities in Malaysia and Vietnam, with a focus on the Vietnamese experience, the lessons that could be learnt from the Malaysian case and the potential benefits that could be obtained by the country from the development if MNE supplier linkages. The reasons for Giroud compare the activities of multinationals in both Vietnam and Malaysia are that Malaysia’s experience with foreign direct investment (FDI) is longer standing than Vietnam, it is a neighboring country. In other words, Vietnam and Malaysia is part of the same regional grouping as Asean, and Malaysia has been host to FDI for far longer, MNEs have developed substantial vertical linkages with its suppliers industries. (Cantwell & Iguchi,2005; Driffield & Noor, 1999; Giroud, 2003; Rasiah, 1995).
2.2 Literature review:
The research is based on the hypothesis that focuses on the creation of MNEs linkages in the host economies and makes the assumption that “multinationals have positive effects on the development of indigenous firsm through the creation of vertical linkages and sourcing of intermediate products locally”… “multinational technology is superior to that of its competitors”. In the research, there are two common types of linkages by MNEs that are vertical (backward) and horizontal (forward) linkages. In general, host countries seek not just more foreign direct investment, but are increasingly interested in its quality in terms of benefits for sustainable economic development. One of the most important ways to tap these benefits is through production linkages between foreign affiliates and domestic firms, backward and forward (UNCTAD, 2001). Beside, the author gives definition of vertical linkages as the relations established with suppliers firms and business customers in the host economy. Its linkages refer to the purchases of primary as raw materials, secondary as parts, components, semi-finish products… and tertiary supplies as services, packaging… In contrast, horizontal linkages imply the marketing, sales and distribution of goods and services in local economy. Giround, A. (2007) differentiate the two types of linkages and chose to focus the vertical linkages in details by conducting a comprehensive literature review of firm-level studies and discussing the activities of MNEs in both Vietnam and Malaysia in order to make four propositions as following:
There is potential for knowledge and technology transfer from foreign affiliates based in Malaysia and Vietnam to their local suppliers.
The nature of the relationship between foreign affiliates and their suppliers changes over time.
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.
MNEs’ knowledge and technology transfer to local suppliers contribute to the improvement of local suppliers’ capabilities.
Giround, A. (2007) has conducted extensive review of relevant literatures on the linkages and relationship with local firms, local suppliers, and improve their quality, productivity and product diversity, how its vertical linkages effects, then the research considers the host governments as the promotion policies as well as the beneficial to development of local suppliers, increase number of countries that adopted policies. The research draws from existing literature on vertical linkages and the literature on local technological capabilities. Moreover, the empirical studies focus on case studies and firm level data, with time, the linkages assist in upgrading domestic suppliers, through increased technological and other capabilities and subsequent spillover effects on the rest of the economy (Giround, 2000; Kelegama & Foley, 1999; Scott-Kenned, 2004; UNCTAD, 2001). The empirical evidence also used to clearly illustrate the effects and activities of vertical linkages of MNEs, such as the comparison of the cases in Vietnam and Malaysia.
Based on review of literature, the research presents theoretical and empirical context to MNEs linkages activities in host economies and also finds out the comparison between Vietnam and Malaysia of multinationals’ activities. As the results, the research builds an analytical framework for the comparison and assessment of vertical linkages. With the cited resources and data provided by multinational subsidiaries, the research seems to show credibility and persuades the readers on their views of point.
2.3 Paradigm and Design:
The term of paradigm refers to the process of scientific practice based on people’s philosophies and assumptions about the nature of knowledge (Kuhn, 1962). In the research, based on problem solving orientation and leading to rational explanation, Giroud (2007) used the realistic approach – qualitative paradigm. In terms of ontological, the nature of reality is both objective and subjective that means the research clearly defines vertical linkages as the relations established with supplier firms and business customers in the host economy. The ontological is concerned to establish the kinds of things which exist, the claim to be the bedrock of all philosophical thinking and all knowledge. And it also assesses the existence of technology and knowledge transfer from MNEs to local suppliers, compare the experience of Malaysia and Vietnam by collecting firm-level data. For epistemology, the author creates an analytical construct of various data to analyze and compare the activities of MNEs vertical linkages between Vietnam and Malaysia which can help inform on what is acceptable knowledge in a discipline. Based on the assumption that multinationals have positive effects on the development of indigenous firms and multinational technology through creation of vertical linkages, the research discusses and proves this hypothesis across four propositions. In the research, Giroud, A. (2007) gives qualitative with value-laden and biased of axiological that means the role of values and the rhetorical is qualitative with informal.
Additionally, for research design, it is a framework for the generation of evidence that is suited both to a certain set of criteria and to the research question in which the investigator is interest. The author uses cross-sectional design that is “based on positivist methodology designed to obtain information on variables in different contexts, but at a particular time – as opposed to observing changes over time…use qualitative methods”. Besides, the research also uses comparative case studies that involve comparisons between two or more organization. Giroud, A. (2007) chooses the target group for the research is multinational firms which are operating in the electronics sector or in the textiles and garment sector. The reason for choosing the sample is that electronics or textiles are pillars in the economies of countries across Southeast Asia, and recipient to a substantial share of FDI in Malaysia and Vietnam. Additionally, in the research, a semi-structured questionnaire is used to interview managers in both Malaysia and Vietnam. This survey’s objective is to examine the activities performed by multinational firms and assess vertical linkages established in the host economy. The questionnaires are defined vertical linkages in both forward and backward linkages, however, the research concentrates on backward linkages and related knowledge and technology transfer. Specifically, there are 49 interviews conducted in Malaysia and Vietnam during 2002 and the results summaries some of the key characteristics of MNEs, and provides a comparison with a similar earlier study conducted of multinational firms in the electronics sector; textiles and garments in Malaysia and Vietnam. Moreover, foreign affiliates’ managers are asked to indicate the extent to which foreign firm is involved in knowledge transfer activities to local suppliers. Then managers discuss with the researchers the interactions with suppliers that led to knowledge transfer. (Giroud, A. (2007)).
The research uses mix methodological approach that combines at the research strategy level as survey, case study, and the level of qualitative and quantitative data gathering and methods as interview, questionnaire… For primary data collection methods, the author follows on semi structure questionnaire that means the researcher will have a list of themes and questions to be covered but the detail may vary from interview to interview. It is used for interview the managers in Malaysia and Vietnam about which the foreign firm is involved in knowledge transfer activities to local suppliers, and foreign affiliates interact with their suppliers intentionally or incidentally. This questionnaire is made by the survey strategy, but both experiment and case study strategies make use of this technique. The research uses these questionnaires for interviewing, and these are very structured, requiring a quantitative approach and contain more open questions or more qualitative approach. Additionally, Giroud, A. (2007) focus on multinational firms of electronics or electrical sector, textiles and garment sector as the target groups for analyzing. The target group is a form of group interview and it is particularly useful for discovering the range of views and attitudes present within the group. In the research, these target groups are “two industries which are pillars in the economies of countries across Southeast Asia and recipient to a substantial share of FDI in both Vietnam and Malaysia” (Giroud, 2007). The objective of these questionnaire and interview managers is to examine the activities performed by multinational firms and assess the backward linkages established in the host economy as Vietnam and Malaysia. Furthermore, for secondary data collection methods, the research includes all data gathered by someone else and presented in a variety of forms, such as firm-level data, case studies, the report or literature review as hypothesis, propositions… The key assumption adopted in the research is that “FDI contributes to the development pattern of both Malaysia and Vietnam, through the creation of linkages and subsequent knowledge and technology transfer”. And the hypothesis is that “multinationals have positive effects on the development of indigenous firms through the creation of vertical linkages and sourcing of intermediate products locally, and also the multinational technology is superior to that of its competitors”. Moreover, Giroud (2007) examines four propositions about MNEs activities and relationship in both Vietnam and Malaysia at the time of 1996 and 2002 based on the concept, the circumstances, the report, firm-level data and comparison approach. Thus, the secondary sources in the research present a theoretical and empirical context to the research, demonstrate familiarity with existing research and show what contribution of the research will make. It is also build an analytical framework for the research. It means Giroud (2007) analyses that MNEs are sensitive to the level of economic development of host economy, which leads to varying types of FDI and multinational activities. Then weaker vertical linkages are anticipated in Vietnam, the principle of comparative dynamic advantage and related restructuring of economic activity follows a different path for countries in transition as Vietnam (Giroud, A. (2007)).
2.5 Results and Presentation:
The research has achieved its purpose and aim of comparing the activities of multinational in both Vietnam and Malaysia that locally owned suppliers in Vietnam do not yet benefit from foreign firms’ superior technology and managerial expertise to the same extent as those in Malaysia. Additionally, Giroud, A. (2007) also makes the research with clearly structure that leads to easy to understand and effective communication. Moreover, at the first parts of this article, it is simple technical language, containing sufficient information that helps readers easy to follow with an overview, abstract and clearly introduction. Besides, the research has specific format with the purpose and scope of the research, methods, results, conclusion and recommendations.
Further, the research has suggestions that apply to other transition economies, however the individual environments are different significantly, and the linkage promotion measures of success can only be achieved in the contextually specific conditions and the policies are in place. (Giroud, A. (2007)). The research is reliability as well as the dependability of data collected, and the test or measurement used to collect it. Its reliable describes consistency and is one which gives the same results if the same individuals are measured on more than one occasion. On another hand, the conclusion is apprehensive in approval of all objectives, aims, rhetorical questions and test of theory raised during the whole research. Giroud (2007) also successfully suggest new directions of Vietnam economic and political systems in the future. “The suggestions given apply to other transition economies, but individual environments differ significantly and the success of linkage promotion measures can only be achieved when contextually specific conditions and policies are in place.” (Giroud, A. 2007)