Multinational enterprises and their linkage effects on local socio-economic environments in emerging markets

This study investigates how Multinational Enterprise (MNE) factors and host country factors have an impact on backward relationship linkage formation and how the linkages between the foreign subsidiary and local firms generate benefits to the local socio-economic environment. A model is developed from the literature and refined using case studies based on in-depth interviews with top managers of service companies' foreign subsidiaries operating in Poland. The findings suggest that four factors affect the formation of relationship linkages: the MNE's mode of entry, the subsidiary's autonomy, government policy (consisting of the development of infrastructure and skills needed by MNEs and protection of data and intellectual property rights), and government incentives (including incentives for both long-term projects and the search for and identification of newer technology). Benefits to the local socio-economic environment deriving from linkages include local jobs, absorption of knowledge and uplifting of the firms' self-image. The study concludes with implications for policy makers.