Transnational Corporations and Local Embeddedness: Company Case Studies from Shanghai, China
Many factors impinge on local involvement in transnational corporation (TNC) networks. Two factors have not been explored, the previous economic strength of local partners and the large domestic market. This study employs site interviews and survey data in Shanghai to demonstrate that these two factors do affect the local involvement in management, industrial linkages, and technology transfer. The paper discusses China's cultural and political background, TNC's market-capture motive, and equity joint ventures as the most common entry modes. The influence appears more evident when the two factors come together in joint ventures. Evidence also suggests that the overall localization level in Shanghai is lower than in some other developing countries because of the novelty of TNC investment in the city. On this account, as joint ventures constitute the main mode of TNC investment, increasing localization is anticipated in the years ahead.