Foreign direct investment as engine of economic development in peripheral economies. What can we learn from the study of two different cases: the maquiladora subsidiary (Nicaragua) and a textile manufacturing subsidiary in (Albania)
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Using the analysis of two apparently very different cases, a Taiwanese maquiladora subsidiary of the garment industry (Nien Hsing Textile Co.) in Nicaragua and an Italian subsidiary in Albania, we try to verify the existence of the benefits attributed by many host governments to inward manufacturing foreign direct investment as engine of development in peripheral economies. In each case, we study three specific questions: (1) the technological transfer from the subsidiary, (2) the mobility potential of the manufacturing activities of the subsidiary, and (3) the evolution of the quality of the subsidiary (integration in the territory and complexity of the activities realised) in time. In answering our questions we conduct fieldwork in the two countries. We interacted directly with stakeholders involved in the operations of each subsidiary including interviews with corporate managers and employees, data collection on subsidiary operations, and visits on production sites. We analyze the main channels of technology transfer focusing on the quality of linkages each subsidiary established in the local economy, on the level of additional formal and informal knowledge benefiting the local labor force, and on the support offered to local suppliers in strengthening production activities. We continue by identifying the main factors affecting the mobility of each subsidiary by differentiating between impeding and facilitating factors. Among impeding factors we concentrate on: (a) the resources (generic vs. specific) utilized by each subsidiary in the two countries, (b) market access opportunities in the local economy, (c) the nature of assets owned and engaged in realizing production activities, and (d) other factors constraining the mobility potential (exit costs and the level of integration of each subsidiary with other units of the multinational enterprise). With regard to facilitating factors we particularly consider the existence of substitute plants. In responding to our third question, we look into the nature of linkages (developmental vs. dependent) established by each subsidiary with local suppliers. Furthermore, we examine not only the change in the level of complexity of functions and duties occurring during the operational life of the subsidiaries but also the specific factors that trigger such a change. Among the factors considered in our research are the decisions made by headquarters on allocation of responsibilities, actions taken by the managers supervising each subsidiary, and on the dynamics occurring in the local business environment. The similarities and differences found in the two cases cast doubts upon the contribution of this investment to the development potential of the economy of the host territory.
Citationvan Wunnik, L.; Kacani, J. Foreign direct investment as engine of economic development in peripheral economies. What can we learn from the study of two different cases: the maquiladora subsidiary (Nicaragua) and a textile manufacturing subsidiary in (Albania). A: Regional Studies Association Annual European Conference. "RSA European Conference - Full Papers". Izmir: 2014, p. 1-21.