Country of Origin Effects on Knowledge Transfers from MNEs to their Chinese Suppliers: an Exploratory Investigation

Abstract

This chapter is derived from a broader study (Duanmu, 2005) that investigates the process and content of vertical knowledge transfers from multinational enterprises (MNEs) to Chinese supplier firms in the electrical and electronics industry. Although there is much work on the role of spillover effects from foreign direct investment (FDI) on the host economy, our understanding about how they occur at a micro-level is limited. The broader study is a response to Meyer’s (2004) call for work on spillover effects through forward and backward linkages based on convincing theoretical arguments. It attempts to reveal the varied and complicated micro-level considerations in the process of vertical knowledge transfer. One such influential factor is the country of origin (COO) of the inward-investing MNE; this is the focus of the present chapter. It draws upon data gathered from interviews with US, EU and Japanese MNEs with operations in China and their respective Chinese component suppliers. It demonstrates that COO effects are quite distinct between East and West, with different implications for the types of knowledge transferred to suppliers and the timing of such activities in the duration of a supply relationship.