Transnational Corporations, Local Adaptation and Inter-Firm Linkages in Developing Countries: Some Contrasts with Local Enterprises in India 1

Abstract

The issue of how transnational corporations (TNC) affiliates adapt locally within emerging markets while sustaining their global competitive advantage has been debated and discussed in international business literature. Using a rich dataset of over 300 companies in India, we examine if the ability of TNC-affiliates to adapt and strike linkages in host countries is in any way different to those of their local counterparts. Our results show that TNC-affiliates and local enterprises (LE) behave differently across a majority of dimensions predicted, but whereas this difference is robust for mature industries like chemicals, the same cannot be claimed for high technology global industries like electronics and transport equipment. This suggests that the behavioural differences between the two groups of firms may be strongly influenced by market structural variables impinging upon the industries in which they compete. The results have implications for TNC-affiliates striving to streamline their strategy with pressures in their task environment and also for nation-states as to how to best devise policy mechanisms to assist the same. (a)