The document discusses the motivations and benefits for transnational corporations (TNCs) to develop linkages with small and medium-sized enterprises (SMEs), emphasizing increased flexibility, productivity gains, and technological upgrades. While TNCs can provide SMEs with market access and financial support, there are risks such as dependency and exposure to market cycles. It also highlights the role of government and support institutions in fostering these linkages through effective policies, financial aids, and industrial promotion.

1. PROMOTING SUSTAINABLEPROMOTING SUSTAINABLE
TNC/SMETNC/SME--LINKAGESLINKAGES
presented bypresented by
LorraineLorraine RuffingRuffing andand Jaques FerriereJaques Ferriere

2. nn TNCs focus on coreTNCs focus on core
activities and outsource ofactivities and outsource of
nonnon--competitive activitiescompetitive activities
nn Reduced transaction andReduced transaction and
factor costs for TNCsfactor costs for TNCs
through operations withthrough operations with
local firmslocal firms
TNC/SMETNC/SME--LinkagesLinkages
Motivations for TNCs to develop linkages with SMEsMotivations for TNCs to develop linkages with SMEs

3. nn Increased flexibility / speedIncreased flexibility / speed
by offby off--loading someloading some
operationsoperations
nn Productivity gainsProductivity gains
TNC/SMETNC/SME--LinkagesLinkages
Motivations for TNCs to develop linkages with SMEsMotivations for TNCs to develop linkages with SMEs

4. TNC/SMETNC/SME--LinkagesLinkages
Linkages
and
Spillovers
between
TNCs and
SMEs
Backward linkages
with suppliers
Forward linkages
with customers
Linkages with
technology partners
Other spillover
effects
Backward linkages
with suppliers

5. nn TNCs increasingly tend to perceive theTNCs increasingly tend to perceive the
building up of SME supplier networks as abuilding up of SME supplier networks as a
longlong--term investmentterm investment
TNC/SMETNC/SME--LinkagesLinkages

6. Transnational Corporations that carry out anTransnational Corporations that carry out an
Corporate Supplier DevelopmentCorporate Supplier Development ProgrammesProgrammes::
TNC/SMETNC/SME--LinkagesLinkages
nn HitachiHitachi
nn IntelIntel
nn MotorolaMotorola
nn PhilipsPhilips
nn ToyotaToyota
nn UnileverUnilever
nn AngloAnglo--AmericanAmerican

7. TNC/SMETNC/SME--LinkagesLinkages
nn Linkages withLinkages with transnationalstransnationals havehave benefitsbenefits
for small and mediumfor small and medium--sized enterprises butsized enterprises but
also somealso some risksrisks

8. TNC/SMETNC/SME--LinkagesLinkagesBENEFITSBENEFITS
nn Technological andTechnological and
managerial upgradingmanagerial upgrading
of SMEsof SMEs

9. TNC/SMETNC/SME--LinkagesLinkages
nn Facilitation of otherFacilitation of other
business alliancesbusiness alliances
nn Transformation intoTransformation into
internationalized SMEsinternationalized SMEs
BENEFITSBENEFITS

10. TNC/SMETNC/SME--LinkagesLinkages
nn Market access,Market access,
guaranteed outlet forguaranteed outlet for
productionproduction
nn Information on marketInformation on market
trends for SME strategictrends for SME strategic
positioningpositioning
BENEFITSBENEFITS

11. TNC/SMETNC/SME--LinkagesLinkages
nn Facilitated access toFacilitated access to
credit or other financialcredit or other financial
supportsupport
BENEFITSBENEFITS

12. TNC/SMETNC/SME--LinkagesLinkages
nn DynamicDynamic
entrepreneurship, andentrepreneurship, and
specializatonspecializaton byby SMEsSMEs
BENEFITSBENEFITS

13. TNC/SMETNC/SME--LinkagesLinkagesRISKSRISKS
nn Overly dependent onOverly dependent on
the TNC customerthe TNC customer
nn Caught in “cost down”Caught in “cost down”
market cycles imposedmarket cycles imposed
by TNC global playersby TNC global players

14. TNC/SMETNC/SME--LinkagesLinkages
nn Exposure to constantlyExposure to constantly
increasing nonincreasing non--tradetrade
barriers (high corporatebarriers (high corporate
and international qualityand international quality
standards)standards)
RISKSRISKS

15. Partnerships for Sustainable LinkagesPartnerships for Sustainable Linkages
Roles of PartnersRoles of Partners
nn Government:Government: vision, commitment,policiesvision, commitment,policies
(economic incentives, skill(economic incentives, skill
development)development)
nn TNCs:TNCs: monitoring and coachingmonitoring and coaching
nn SMEs:SMEs: vision, commitment, financialvision, commitment, financial
stabilitystability
nn Support agencies: Global Supplier ProgrammeSupport agencies: Global Supplier Programme

16. Role of Government and supportRole of Government and support
institutions in linkage developmentinstitutions in linkage development
Effective Policies
-Encourage foreign investment
-Encourage local supplier development
Financial Aids
- Incentives
- Tax exemptions
Business environment
- Re-orientation for globalization
- Political and economic stability
Robust educational system
- Multi skilled and agile workforce
- Promote learning organization
Industrial Promotion
- Opportunities for linkages
& networking (trade missions)
- Foreign collaboration with
local industries
Good Infrastructure
- Access/ transportation
- IT capability

17. TNC/SMETNC/SME--LinkagesLinkages
Best practices in terms of TNC linkageBest practices in terms of TNC linkage programmesprogrammes
nn access to TNC innovation centers and engineers/access to TNC innovation centers and engineers/
consultantsconsultants
nn assignment of TNC staff toassignment of TNC staff to SMEsSMEs, sharing of, sharing of
knowknow--howhow
nn phased upgrading from SME plant layout tophased upgrading from SME plant layout to
technological capabilities (design capability,technological capabilities (design capability,
flexible manufacturing, ISO certifications)flexible manufacturing, ISO certifications)

18. TNC/SMETNC/SME--LinkagesLinkages
Best practices in terms of TNC linkageBest practices in terms of TNC linkage programmesprogrammes
nn coaching and mentoringcoaching and mentoring
programmesprogrammes
nn periodic evaluation andperiodic evaluation and
benchmarkingbenchmarking
nn facilitate SME access tofacilitate SME access to
other business opportunitiesother business opportunities
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19. TNC/SMETNC/SME--LinkagesLinkages
UNCTAD’s Global Linkage ProgrammeUNCTAD’s Global Linkage Programme
This project aims at assistingThis project aims at assisting
SMEsSMEs in:in:
nn stimulating vision/commitmentstimulating vision/commitment
of governments in developingof governments in developing
countriescountries
nn identifying both potentialidentifying both potential
suppliers from amongsuppliers from among SMEsSMEs
andand TNCsTNCs that are open tothat are open to
forging linkages with SMEforging linkages with SME
partnerspartners

20. TNC/SMETNC/SME--LinkagesLinkages
UNCTAD’s Global Suppliers ProgrammeUNCTAD’s Global Suppliers Programme
nn providing guidance to governments on appropriateproviding guidance to governments on appropriate
economic incentives that facilitate mutuallyeconomic incentives that facilitate mutually
beneficial linkagesbeneficial linkages
nn starting coaching programmes withstarting coaching programmes with TNCsTNCs to upgradeto upgrade
SMEsSMEs technology and managementtechnology and management
nn diffusing information on international best practicesdiffusing information on international best practices