Multinationals of Industrial Co-development: Co-creating New Institutions of Economic Development

Abstract

Over the last decades original equipment manufacturers (OEMs) in highly developed countries have been off-shoring production to low-wage countries to achieve cost-advantages to the effect that dominating global value chains (DGVC) have emerged. As this leads to huge layoffs of employees in Western economies, many interest groups have joined forces and engaged in taking new forms of action, generating social and organisational innovations. At first the concentration of headquarters of large multinationals (LMNCs) in the First World seemed to promise that they could evolve towards knowledge societies. This expectation followed from the belief that only large corporations of developed countries were able to finance R&D labs large enough to turn out new products, if supported sufficiently by basic research institutions (Kristensen 2010). However, the increasing attempts to upgrade industry in emerging economies have gradually undermined this vision of future co-development. Many low cost countries imitate the highly developed by investing in R&D and higher education so that they might be allocated advanced tasks and innovative projects within existing DGVCs. This evolution is diffusing fast to BRIC-countries. Furthermore, Western small- and medium-sized enterprises (SMEs) that used to supply repetitive components for the large OEMs have become much more innovative. Innovation in some developed countries has shifted from domination by LMNCs to