PROMOTING SUSTAINABLE PROMOTING SUSTAINABLE TNC/SMETNC/SME--LINKAGESLINKAGES

presented by presented by Lorraine Lorraine Ruffing Ruffing and and Jaques FerriereJaques Ferriere

TNCs focus on core TNCs focus on core activities and outsource of activities and outsource of nonnon--competitive activities competitive activities

Reduced transaction and Reduced transaction and factor costs for TNCs factor costs for TNCs through operations with through operations with local firmslocal firms

TNC/SMETNC/SME--LinkagesLinkagesMotivations for TNCs to develop linkages with SMEsMotivations for TNCs to develop linkages with SMEs

Increased flexibility / speed Increased flexibility / speed by offby off--loading some loading some operationsoperations

Productivity gainsProductivity gains

TNC/SMETNC/SME--LinkagesLinkagesMotivations for TNCs to develop linkages with SMEsMotivations for TNCs to develop linkages with SMEs

TNC/SMETNC/SME--LinkagesLinkages

Linkages and

Spillovers between TNCs and

SMEs

Backward linkages with suppliers

Forward linkages with customers

Linkages with technology partners

Other spillover effects

Backward linkages with suppliers

T N Cs increasingly tend to perceive the T N Cs increasingly tend to perceive the build ing up o f SM E supplier netw orks as a bu ild ing up o f SM E supplier netw orks as a longlong -- term investm entterm investm ent

T N C/ SM ET N C/ SM E -- L inkagesL inkages

Transnational Corporations that carry out an Transnational Corporations that carry out an Corporate Supplier DevelopmentCorporate Supplier Development ProgrammesProgrammes::

TNC/SMETNC/SME--LinkagesLinkages

HitachiHitachi

IntelIntel

MotorolaMotorola

PhilipsPhilips

ToyotaToyota

UnileverUnilever

AngloAnglo--AmericanAmerican

TNC/SMETNC/SME--LinkagesLinkages

Linkages with Linkages with transnationalstransnationals have have benefitsbenefitsfor small and mediumfor small and medium--sized enterprises but sized enterprises but also some also some risksrisks

TNC/SMETNC/SME--LinkagesLinkagesBEN

EFIT

SBEN

EFIT

S

Technological and Technological and managerial upgrading managerial upgrading of SMEsof SMEs

T N C/ SM ET N C/ SM E -- L inkagesL inkages

Facilitation o f o ther Facilitation o f o ther business alliancesbusiness alliances

T ransform ation in to T ransform ation in to internationalized SM Esinternationalized SM EsBEN

EFIT

SB

ENEF

ITS

TNC/SMETNC/SME--LinkagesLinkages

Market access, Market access, guaranteed outlet for guaranteed outlet for production production

Information on market Information on market trends for SME strategic trends for SME strategic positioning positioning BEN

EFITS

BEN

EFITS

TNC/SMETNC/SME--LinkagesLinkages

Facilitated access to Facilitated access to credit or other financial credit or other financial supportsupport

BENEFITS

BENEFITS

TNC/SMETNC/SME--LinkagesLinkages

Dynamic Dynamic entrepreneurship, and entrepreneurship, and specializatonspecializaton by by SMEsSMEs

BEN

EFIT

SBEN

EFIT

S

TNC/SMETNC/SME--LinkagesLinkagesRIS

KS

RIS

KS Overly dependent on Overly dependent on

the TNC customerthe TNC customer

Caught in “cost down” Caught in “cost down” market cycles imposed market cycles imposed by TNC global playersby TNC global players

TNC/SMETNC/SME--LinkagesLinkages

Exposure to constantly Exposure to constantly increasing nonincreasing non--trade trade barriers (high corporate barriers (high corporate and international quality and international quality standards)standards)

RISKS

RISKS

Partnerships for Sustainable LinkagesPartnerships for Sustainable LinkagesRoles of PartnersRoles of Partners

Government:Government: vision, commitment,policies vision, commitment,policies (economic incentives, skill (economic incentives, skill development)development)

TNCs:TNCs: monitoring and coachingmonitoring and coaching

SMEs:SMEs: vision, commitment, financial vision, commitment, financial stabilitystability

Support agencies: Global Supplier ProgrammeSupport agencies: Global Supplier Programme

Role of Government and support Role of Government and support institutions in linkage developmentinstitutions in linkage development

Effective Policies-Encourage foreign investment-Encourage local supplier development

Financial Aids- Incentives-Tax exemptions

Business environment-Re-orientation for globalization-Political and economic stability

Robust educational system-Multi skilled and agile workforce-Promote learning organization

Industrial Promotion-Opportunities for linkages & networking (trade missions)

-Foreign collaboration with local industries

Good Infrastructure-Access/ transportation- IT capability

TNC/SMETNC/SME--LinkagesLinkagesBest practices in terms of TNC linkage Best practices in terms of TNC linkage programmesprogrammes

access to TNC innovation centers and engineers/ access to TNC innovation centers and engineers/ consultantsconsultants

assignment of TNC staff to assignment of TNC staff to SMEsSMEs, sharing of , sharing of knowknow--how how

phased upgrading from SME plant layout to phased upgrading from SME plant layout to technological capabilities (design capability, technological capabilities (design capability, flexible manufacturing, ISO certifications)flexible manufacturing, ISO certifications)

TNC/SMETNC/SME--LinkagesLinkagesBest practices in terms of TNC linkage Best practices in terms of TNC linkage programmesprogrammes

coaching and mentoring coaching and mentoring programmes programmes

periodic evaluation and periodic evaluation and benchmarking benchmarking

facilitate SME access to facilitate SME access to other business opportunitiesother business opportunities !! !! !!

TNC/SMETNC/SME--LinkagesLinkagesUNCTAD’s Global Linkage ProgrammeUNCTAD’s Global Linkage Programme

This project aims at assisting This project aims at assisting SMEsSMEs in: in:

stimulating vision/commitment stimulating vision/commitment of governments in developing of governments in developing countriescountries

identifying both potential identifying both potential suppliers from among suppliers from among SMEsSMEsand and TNCsTNCs that are open to that are open to forging linkages with SME forging linkages with SME partnerspartners

TNC/SMETNC/SME--LinkagesLinkagesUNCTAD’s Global Suppliers ProgrammeUNCTAD’s Global Suppliers Programme

providing guidance to governments on appropriate providing guidance to governments on appropriate economic incentives that facilitate mutually economic incentives that facilitate mutually beneficial linkagesbeneficial linkages

starting coaching programmes with starting coaching programmes with TNCsTNCs to upgrade to upgrade SMEsSMEs technology and managementtechnology and management

diffusing information on international best practicesdiffusing information on international best practices