The embeddedness of transnational corporations in Chinese cities: Strategic coupling in global production networks?

• Published in: Habitat international 2013-10, Vol.40, p.82-90
• Main Authors: Wei, Y.H. Dennis, Liao, Felix H.F.
• Format: Article
• Language: English
• Subjects: Autonomy; Benefits; Case studies; China; China (People's Republic); Embeddedness; FDI; Foreign direct investment; Foreign investments; Global production network; Globalization; Industry; Information and communication technologies; Information technology; International business enterprises; Markets; Production; Regression analysis; Research and development; Subsidiaries; Technology linkage; Transnational corporation; Yangtze river
• ISSN: 0197-3975; 1873-5428
• DOI: 10.1016/j.habitatint.2013.01.005

The embeddedness of transnational corporations (TNCs) in metropolitan economies has become a central issue in the research on globalization and local development. This paper attempts to enhance understanding of FDI embeddedness by assessing TNCs' backward and technological linkages with domestic firms. Through a case study of the information and communication technology (ICT) industry in Suzhou, a frontier globalizing city in the Yangtze River Delta in China, it was found that strategic coupling between TNCs and domestic Chinese firms rarely exists and global production networks (GPN) have not brought substantial benefits to the development of domestic firms in the region. Regression analysis further reveals that TNCs' backward and technological linkages with domestic firms are highly selective and contingent upon market potential in the host region, TNCs' research and development (R&D) orientation and to a lesser extent subsidiary autonomy. It is also found that the booming and sizable domestic market and the development of domestic firms have potential to pave the way for upgrading. These findings suggest that there is a need to develop a broader conceptualization of the upgrading pathways of local firms beyond the notion of strategic coupling in the GPN perspective. ► This paper assesses transnational corporations' embeddedness in Suzhou, China. ► Strategic coupling between TNCs and domestic Chinese firms rarely exists. ► Global production networks have not brought substantial benefits for upgrading. ► There is a need to develop a broader conceptualization of upgrading pathways.