Masataka Fujita

The Author’s Survey

This study is largely derived from the results of the survey conducted by the author. The survey (hereafter the author’s survey) was designed to obtain information about the characteristics and consequences of small and medium-sized transnational corporations’ (TNCs) activities compared with those of large (TNCs) and indigenous firms. Three kinds of questionnaires were prepared (one for parent firms, one for their foreign affiliates and one for indigenous firms), pretested and revised prior to mailing. A total of 3,3 15 questionnaires were sent to small and medium-sized TNCs of 18 developed countries. A further 1,257 questionnaires were mailed to their foreign affiliates. For purposes of comparison, 862 foreign affiliates of large TNCs and 460 indigenous firms were selected and questionnaires were sent to them. These questionnaires were mailed in 1991 and 1992. The author’s survey is completed with an interview made with public institutions in developed countries that support small and medium-sized enterprises and their internationalization including foreign direct investment. The interview was conducted with 26 institutions in 1992. These questionaaires used in the author’s survey are presented in the annex A. The profile of the companies in the author’s survey appears in annex B.

Trends and Patterns of Foreign Direct Investment by Small and Medium-Sized Enterprises

This chapter presents statistical evidence on foreign direct investment (FDI) by small and medium-sized enterprises (SMEs). There are virtually no countries for which consistent and systematic FDI data are available by firm size, but data compiled by the author allow an analysis of broad characteristics, trends and patterns. This chapter utilizes mainly aggregate data reported by the countries concerned, but is also supplemented by data from the author’s survey and other surveys.

Policy Suggestions to Promote Foreign Direct Investment by Small and Medium-Sized Enterprises into Developing Countries

This chapter presents some policy options that home and host countries, as well as international organizations, could consider to facilitate the internationalization of small and medium-sized enterprises (SMEs), in particular into developing countries. As will become evident below, particular attention should be given to the role that firms in host countries can play as counterparts to encouraging the transnationalization process of SMEs. The chapter is structured around three major themes: the promotion of foreign direct investment (FDI) by SMEs by developed countries, developing countries and international organizations; programmes and mechanisms that can be advanced (or reinforced) to stimulate the transnationalization of SMEs; and, criteria that should be taken into consideration when designing specific policies in this respect.

Measures to Promote Foreign Direct Investment by Small and Medium-Sized Enterprises

This chapter presents initiatives and programmes aimed at encouraging international activities in developing countries by small and medium-sized enterprises (SMEs) from developed countries. The main focus of the chapter is on governmental institutions in developed countries that deal directly and explicitly with this activity, though the experiences of some developing countries are also examined. Initiatives promoted by the private sector or those that are only marginally advanced by public entities are not taken into consideration. Furthermore, all initiatives by international organizations are essentially related to the advancement of developing-country SMEs and are thus not relevant in the present context.

Small and Medium-Sized Enterprises in Domestic Economies

This chapter examines available evidence on the role of small and medium-sized enterprises (SMEs) in major home economies in developed countries. The comparative analysis is made based on the share of SMEs in the economy in terms of the number of enterprises, number of employees, value of sales and value added, on labour productivity, and on the role of job creation, innovation and exports.

Salient Features of Small and Medium-Sized Transnational Corporations

This chapter describes the main features of small and medium-sized transnational corporations (TNCs) in terms of such variables as the markets and industries in which they operate, ownership, forms of investment, performance and competitive advantages. It also deals with strategies that small and medium-sized enterprises (SMEs) tend to take in their foreign operations. This information is essential in designing any policy framework for SMEs’ transnationalization, especially in developing countries. While the previous chapter discussed issues related to foreign direct investment (FDI) by SMEs in various countries with, in most parts, aggregate data, this chapter contains a micro-level or firm-level analysis, using firm-specific information obtained from the author’s survey.

The Transnationalization Theory and Evidence of Small and Medium-Sized Enterprises

In this chapter, the transnationalization process will be examined as it applies to small and medium-sized enterprises (SMEs) in general, and in particular, those small and medium-sized transnational corporations (TNCs) that participated in the author’s survey. Following a discussion of a number of theories and their application to SMEs, some of the key expectations from theoretical and empirical literature on small and medium-sized TNCs will be synthesized. The author’s survey results will be utilized in sections B and C to assess the main features and motivations underlying SMEs’ transnationalization.

Problems in the Transnationalization Process of Small and Medium-Sized Enterprises

In this chapter, the main constraints and obstacles facing small and medium-sized enterprises (SMEs) in their operations in foreign markets are discussed. These firms must overcome specific limitations in order to operate abroad, different from the constraints typically encountered by large transnational corporations (TNCs). The identification of these constraints is a crucial preliminary step in the design of policy instruments facilitating the participation of SMEs in international production.

Impact on Host Developing Countries of Foreign Direct Investment by Small and Medium-Sized Enterprises

As shown in chapter I, the role that small and medium-sized enterprises (SMEs) play in the economic process is substantial in every country. Whether they are subcontractors, independent niche producers, or small producers serving a local community, the development of SMEs is essential for healthy economic growth. Because of their labour intensity, innovativeness and potential role as exporters, SMEs can help alleviate unemployment problems, increase the variety of specialized or sophisticated goods and services on the market and earn foreign exchange. However, they are still not as significant in foreign direct investment (FDI) as they are players in their home economies. Moreover, their FDI is concentrated in developed countries and, as a result, small and medium-sized transnational corporations (TNCs) are still minor actors in the introduction of foreign capital, technology and other resources into developing countries. However, as was shown in chapter III, there is some indication that small and medium-sized TNCs are increasing their investment in developing countries. This is especially the case for Japanese SMEs.