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The SME Advantage: Adding Local Touch to Foreign Transnational Corporations in Singapore

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  • Yoke-Tong Chew
  • Henry Wai-Chung Yeung

Abstract

The fast-changing nature of technology and the high-quality requirements of manufactured products have altered the role of suppliers from passive manufacturers to proactive and innovative manufacturers. In Singapore, many local small and medium enterprises (SMEs) are suppliers to foreign transnational companies (TNCs), providing them with parts and components and other kinds of production-related services. This paper examines the areas in which local SME suppliers play an important role in transferring expertise to their foreign TNC customers. This 'reverse transfer' contradicts the conventional wisdom of technology transfer from giant TNCs to their SME suppliers via supplier-buyer linkages or subcontracting relations. To support our propositions, we conducted a postal survey of 41 local SMEs and interviews with representatives of nine SMEs. Empirical findings show that local SMEs are more capable than their foreign TNC customers in such aspects as local knowledge and soft technology. Local knowledge includes local technical specifications, standards, management styles and local culture. Furthermore, the presence of such expertise in soft technology as process and product technologies has led local SME suppliers to participate more in customers' product designs. At a national scale, local knowledge and expertise in soft technology embedded in Singapore's supporting industries can enhance the locational or 'L' advantage of Singapore. Le caractere evolutif de la technologie et les besoins qualitatifs des produits manufactures ont change le role des fournisseurs, des fabricants passifs aux fabricants actifs et innovateurs. Au Singapour, beaucoup des petites et moyennes entreprises locales (Pme) sont les fournisseurs des entreprises etrangeres transnationales, leur fournissant des pieces detachees et d'autres services lies a la production. Cet article cherche a examiner dans quels domaines les Pme locales jouent un role important dans le transfert de l'expertise aleurs clients que sont les entreprises etrangeres transnationales. Ce 'transfert a rebours' va a l'encontre des idees recues sur le transfert de la technologie des mastodontes transnationales aux Pme a partir des rapports fournisseur-acheteur ou de la sous-traitance. Afin de corroborer ces propositions, on a meneune enquete par correspondance aupres de 41 Pme locales et on a interviewe des representants de neuf Pme. Les resultats empiriques laissent voir que les Pme sont plus competentes que ne le sont les entreprises etrangeres transnationales quant a leur connaissance du milieu local et du logiciel. La connaissance du milieu local comprend les specifications techniques locales, les normes, les modes de gestion et la couleur locale. Qui plus est, la presence d'une telle expertise dans le domaine du logiciel, telles les technologies liees aux procedes et aux produits, a encourage les Pme a participer davantage a la conception des produits de leurs clients. A l'echelle nationale, la connaissance du milieu local et l'expertise dans le domaine du logiciel, ancrees dans les industries annexes du Singapour, pourrait augmenter l'avantage de localisation du Singapour, a savoir l'avantage 'L'. Die rasch wechselnde Natur der Technologie und die hohen Qualitatsanforderungen an Fertigerzeugnisse haben die Rolle des Zulieferers von der eines passiven Produzenten auf die eines vorausschauenden und innovativen Herstellers umgestellt. In Singapur werden auslandische transnationale Korperschaften von kleinen und mittelgrossen ortansassigen Unternehmen mit Teilen, Komponenten und anderen herstellungsbezogenen Dienstleistungen beliefert. Dieser Aufsatz untersucht Gebiete, auf denen SME Zulieferer eine bedeutende Rolle bei der Ubernahme ihrer Fachkenntnisse durch auslandische TNC Kunden spielen. Diese 'gegenlaufige Ubernahme' widerspricht der herkommlichen Uberzeugung der Fachwissenubernahme der SME Lieferanten von riesigen TNCs auf dem Wege der Zuliefer-Ankauferverknupfungen oder Unterkontrahentenbeziehungen. Zur Unterstutzung ihrer These haben die Autoren auf dem Postwege eine Umfrage unter 41 ortsansassigen SMEs und Interviews mit Vertretern von neun SMEs durchgefuhrt. Empirische Befunde zeigen, dass ortsansassige SMEs in Dingen wie Ortskenntnis weiche Technologie weitaus fahiger sind als ihre auslandischen TNC Kunden. Ortskenntnis schliesst dabei ortliche technische Spezifikationen ein sowie Standards, Fuhrungsstil und ortliches Kulturwesen. Daruberhinaus hat das Vorhandensein von Fachkenntnissen in weicher Technologie wie Verfahrenstechnik und Produkttechnologie ortsansassige SME Zulieferer veranlasst, sich vermehrt an Kundenentwurfen fur Produkte zu beteiligen. Aufs Landesganze gesehen konnen ortsansassige Kenntnisse und Fachwissen in weicher Technologie, die in Singapurs unterstutzender Industrie verwurzelt sind, den Standort oder 'L' Vorteil Singapurs nur erhohen.

Suggested Citation

  • Yoke-Tong Chew & Henry Wai-Chung Yeung, 2001. "The SME Advantage: Adding Local Touch to Foreign Transnational Corporations in Singapore," Regional Studies, Taylor & Francis Journals, vol. 35(5), pages 431-448.
    • Handle: RePEc:taf:regstd:v:35:y:2001:i:5:p:431-448
    DOI: 10.1080/713693823
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    2. Jayasundara, JMSB & Rajapakshe, PSK & Prasanna, RPIR & Naradda Gamage, Sisira Kumara & Ekanayake, EMS & Abeyrathne, GAKNJ, 2019. "The Nature of Sustainability Challenge in Small and Medium Enterprises and its Management," MPRA Paper 98418, University Library of Munich, Germany.
    3. Neil M Coe & Martin Perry, 2004. "Promoting Linkage to Foreign Transnational in a ‘Tiger’ State: Singapore and the Local Industry Upgrading Programme," Environment and Planning C, , vol. 22(3), pages 363-382, June.
    4. Ye Ye & Rosmini Omar & Binyao Ning & Hiram Ting, 2020. "Exploring the Interactions of Factory Workers in China: A Model Development Using the Grounded Theory Approach," Sustainability, MDPI, vol. 12(17), pages 1-21, August.
    5. Prashantham, Shameen & McNaughton, Rod B., 2006. "Facilitation of links between multinational subsidiaries and SMEs: The Scottish Technology and Collaboration (STAC) initiative," International Business Review, Elsevier, vol. 15(5), pages 447-462, October.
    6. Harry Jeong & Kwangsoo Shin & Seunghyun Kim & Eungdo Kim, 2021. "What Types of Government Support on Food SMEs Improve Innovation Performance?," Sustainability, MDPI, vol. 13(16), pages 1-23, August.
    7. Sisira Kumara Naradda Gamage & EMS Ekanayake & GAKNJ Abeyrathne & RPIR Prasanna & JMSB Jayasundara & PSK Rajapakshe, 2020. "A Review of Global Challenges and Survival Strategies of Small and Medium Enterprises (SMEs)," Economies, MDPI, vol. 8(4), pages 1-24, October.
    8. Yeung, Henry Wai-chung & Liu, Weidong & Dicken, Peter, 2006. "Transnational corporations and network effects of a local manufacturing cluster in mobile telecommunications equipment in China," World Development, Elsevier, vol. 34(3), pages 520-540, March.
    9. Nader Ale Ebrahim & Shamsuddin Ahmed & Zahari Taha, 2010. "SMEs; Virtual Research and Development (R&D) Teams and New Product Development: A Literature Review," Post-Print hal-00593362, HAL.
    10. Nader Ale Ebrahim & Shamsuddin Ahmed & Zahari Taha, 2009. "Virtual R & D teams in small and medium enterprises: A literature review," Post-Print hal-00593358, HAL.
    11. Lisa De Propris & Nigel Driffield & Stefano Menghinello, 2005. "local industrial systems and the location of FDI in Italy," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(1), pages 105-121.
    12. Naradda Gamage, Sisira Kumara & Ekanayake, EMS & Abeyrathne, GAKNJ & Prasanna, RPIR & Jayasundara, JMSB & Rajapakshe, PSK, 2019. "Global Challenges and Survival Strategies of the SMEs in the Era of Economic Globalization: A Systematic Review," MPRA Paper 98419, University Library of Munich, Germany.

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