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)

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.Postprint (published version

Same industry, same host territory, different evolution paths : breaking the FDI trap in the clothing industry : a case study from clothing manufacturing enterprises in Albania

This research investigates the qualitative effects of foreign direct investments of the clothing industry in a developing country like Albania. The clothing industry is often regarded as the first step of industrialization and as an employment generator for developing countries. With reference to industrialization induced by foreign direct investrnent of the clothing industry in a developing country like Albania, this research looks into whether clothing manufacturing enterprises have broken the FDI trap. The framework includes: (i) knowledge transferred in the hostterritory and (ii) the evolution in the quality of the degree of clothing manufacturing enterprises. This research is based on case study methodologyin which four clothing manufacturing enterprises two ltalian, one German, and one Greek are analyzed based on the proposed framework.The evolution offoreign clothing manufacturing enterprises in Albania, is examined through a variety ofreal contrasted data sources and by overcoming limitations of existing research in the field. Based on the results derived from implementing a case study methodology, conclusions are drawn on the qualitative effects ofFDI and the industrialization Albania has obtained in the last twenty years from the production activity of the four foreign clothing manufacturing enterprises (subsidiaries). With reference to conclusions, policy recom mendations are proposed on enhancing in a host territory a virtuous FDI circle that leads to upgranding at the firm and industry level applicable in developing countries.Esta investigacion investiga los efectos cualitativos de las inversiones extranjeras directas en la industria del vestido en un país en desarrollo como Albania. La industria de la confeccion se considera a menudo como el primer paso de la industrializacion y como generador de empleo para los paises en desarrollo. Con referencia a la industrializacion inducida por la inversion extranjera directa en la industria del vestido en un pais en desarrollo como Albania esta investigacion propone un macro sobre los efectos cualitativos con el fin de ver si las empresas de fabricacion de ropa han roto la trampa de la IED. El macro incluye: (i) el conocimiento transferido en el territorio de acogida, y (ii) la evolucion en la calidad de las filiales de fabricacion de prendas de vestir . Esta investigacion se basa en una metodología de estudio de casos en la que se analizan cuatro empresas de fabricacion de prendas de vestir, dos italianas, una alemana y una griega, sobre la base del macro propuesto. La evolucion de las empresas extranjeras de fabricacion de prendas de vestir en Albania, se examina a traves de una variedad de fuentes de datos reales contrastados y superando las limitaciones de la investigacion existente en el campo. Sobre la base de los resultados derivados de la aplicacion de una metodoligia de estudio de caso, se extraen conclusiones sobre los efectos cualitativos y la industrializacion que Albania ha obtenido en los ultimas veinte años a partir de la actividad de production de las cuatro empresas de fabricacion de prendas de vestir extranjeras. Con referencia a las conclusiones, se proponen recomendaciones de politica para mejorar en un territorio anfitrion un circulo de IED virtuoso que conduzca a la mejora del nivel de la empresa y de la industria aplicable en los paises en desarrolloPostprint (published version

A Framework for Short- vs. Long-Term Risk Indicators for Outsourcing Potential for Enterprises Participating in Global Value Chains: Evidence from Western Balkan Countries

This paper aims to present a benchmarking framework for short- and long-term risk of enterprises in emerging markets that seek integration in global value chains. The benchmark instrument aims in particular to assess short- and long-term risk based on accounting data and estimations of key financial ratios for enterprises located in the Western Balkan region and operating in the materials, industrials, and customer-discretionary industries. In total, the paper considers 310 enterprises. Given the geographical proximity of the region, the benchmark instrument for short- and long-term risks serves to assess the outsourcing potential these enterprises have toward foreign enterprises dominating larger markets such as the European value chain. The framework is applicable to a large-scale annual data series collected on subindustry level in order to obtain a more granular analysis of a particular industry and its respective value chain. The benchmarking instrument indicates that those subindustries performing better both at short- and long-term risk display a higher outsourcing potential and more opportunities for integration in global value chains

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)

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