Technology transfer from TNCs to local suppliers in developing countries: A study of AB Volvo’s truck and bus plants in Brazil, China, India, and Mexico

Abstract

Summary In this study, we use detailed firm-level data from the heavy truck and bus plants of AB Volvo and its 389 local component suppliers in Brazil, China, India, and Mexico to investigate the extent to which domestic suppliers are able to compete with international follow-source suppliers, and improve their operations through technological assistance from their transnational corporation customer. Although follow-source suppliers have captured large shares of local purchases, our findings show that technology transfers from industrialized to developing economies are to a large extent based on local interfirm linkages arising from regular production activities. An instance of this is Volvo, which provides its domestic suppliers with technological assistance, enhancing them to improve their operations. Our findings also show that long-term relationships are important in interfirm learning, although it was demonstrated that more short-term relationships can also generate benefits for domestic suppliers.