Foreign direct investment and local input linkages in Malaysia


This article examines variations in local input linkages in foreign transnational corporations in Malaysia. The extent to which transnational corporations foster such linkages, particularly in a developing host economy, has become an important issue for policy makers and others concerned with the long-term benefits associated with foreign direct investment. This article employs a unique data set, covering inward investors in the electrical and electronics industry, and analyzes in detail the determinants of variations in local input uses. The article develops a model of local input linkages, based on a transaction-cost framework using firm-specific factors, such as nationality of ownership, the age of the plant and its technology, and the extent to which firms employ locally recruited managers and engineers. In addition, the impacts of various policy measures on local input levels are discussed, and also the importance of the original motivation for investing in Malaysia. The article demonstrates that policy initiatives that target particular outcomes, such as stimulating exports or technology transfer, will result in a greater beneficial impact on the host country economy than more generic subsidies.

Divisions: Aston Business School > Aston India Foundation for Applied Research
Aston Business School
Aston Business School > Economics, Finance & Entrepreneurship
Uncontrolled Keywords: local input linkages,foreign transnational corporations,Malaysia,developing host economy,policy makers,foreign direct investment,electrical industry,electronics industry,local input uses
Full Text Link: http://www.unct ... it12v8n3_en.pdf
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PURE Output Type: Article
Published Date: 1999-12
Authors: Driffield, Nigel ( 0000-0003-1056-3117)
Noor, Abd H.M.

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