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TNCs in Perplexity over How to Meet Local Suppliers: The Case of Philippine Export Processing Zone

Discussion Papers

No.167

by OIKAWA Hiroshi
September 2008

ABSTRACT

Transnational Corporations (TNCs) have played a vital role in fostering rapid industrialisation in many developing countries. The Philippines is the case. However, the country has been far lagging behind other ASEAN members in economic performance. The present study examines this issue, mainly focusing on the linkage formation between TNCs affiliates and Philippine local suppliers. Three factors are proposed to determine the overall performance of linkage formation; i.e., outsourcing strategies of TNCs’ local affiliates, local entrepreneurial response, and host government policies. An economic enclave structure is clearly identified in the Philippines, in which only a few locally-owned suppliers have emerged. Extremely weak local entrepreneurship in the Philippines is identified to explain the poor performance of linkage formation.

Keywords: Transnational Corporations (TNCs), Local Suppliers, Linkages, Outsourcing Strategies, Entrepreneurship
JEL classification: O19, F23, L26

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