O'Gorman, William J. M.
MNEs and new enterprise creation: Do MNEs have a direct impact on the amount of new indigenous high-tech start-ups in Ireland?
PhD thesis, Middlesex University.
Previous research into the impact of multinational enterprises (MNEs) on their host economies indicated that, in the main, the impact was positive. For example, Turok (1993a and 1993b) and Brand, Hill and Munday (2000) talked about the benefits derived from backward linkages; Barrow and Hall (1995), Fosfuri, Motta, Ronde (2001), Girma and Wakelin (2001), and Kugler (2002) spoke of other aspects of spillover such as the pecuniary, technological, and skills transfer; and Cooper (1981), Gibb and Ritchie (1982), and Birley (1996) delineated the importance of the employment history of the individual (new enterprise founder) in terms of the
managerial and technical experience that is required to set up and manage a new enterprise.
However, little research exists identifying exactly to what extent MNEs have a direct impact on the level on new high-tech, high-value-add enterprise creation within MNEs* host regions. The purpose of this current research therefore is to identify the extent to which these direct links do, or do not, exist.
Starting with a database of over 9,000 enterprises registered in South East and South West Ireland between 1990 and 2001, the researcher identified 37 founders who had a direct link with an MNE prior to starting their enterprises. A triangulation process was employed in order to understand the extent to which MNEs were influential in the setting up of these new enterprises. One element of the triangulation process was to survey and interview founders of the indigenous enterprises; another was to interview senior executives of the MNEs with which the founders had direct links, and that were still operating in Ireland at the time of this research. The third element of the triangulation process involved interviewing CEOs and regional managers of the State enterprise support agencies operating in South East and South West Ireland. This process closed the circle of data gathering into the circumstances under which founders started their enterprises and the extent to which MNEs had a direct impact on the creation of these new enterprise.
Another unique aspect of this current research is that, unlike previous research, it does not focus on just one single industry sector such as software or IT; it focuses on high-tech, high-value-add businesses such as chemicals, computers, electronics, engineering, manufacturing, pharmaceuticals, plastics & rubber, R&D and labs, software and telecommunications. Nor does this research rely on statistical analysis alone, instead it utilises both quantitative and qualitative techniques.
Even though this current research identified that 58% of the founders did have a direct link with an MNE prior to starting their enterprises, nearly half of them did so only because they were let go (made redundant, fired, or resigned by mutual agreement) from an MNE. None of these founders would have started their enterprise if they were not let go from the MNE, if they had not met with a critical incident in their careers (Cope and Watts, 2006). Thus the research also examined for the presence of latent entrepreneurs among the sample of founders.
Of the 15 MNE senior executives interviewed, only one MNE encouraged and supported their employees to start their own businesses when there were no actual (or threats of) redundancies taking place.
Another interesting finding from this research is that the State enterprise support agencies seem to operate more in a reactive than proactive mode. These agencies appear to wait for clients to come to them and/or wait for announcements of plant closures/downsizing before getting involved in encouraging people to start their own businesses. Also, this research highlights that even though 83% of the founders received soft and/or hard support from State agencies, over 80% of them were not happy with the support they received.
In summary, the unique triangulation process utilised in this research has identified that the link between new enterprise creation and the presence of MNEs is more an outcome of unintended consequences then being an output of defined enterprise policies.
This research contributes different and additional knowledge to the existing body of literature in relation to the benefits of FDI, spillovers from MNEs into host economies, and the process of new enterprise creation. The research has implications for enterprise policy in relation to the role governments and their agencies could play in supporting MNEs to create an environment whereby additionality of jobs can occur in the MNEs host economy, as opposed to State enterprise support agencies focusing on job replacement alone.
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