eThesis - School of Business electronic theses

The objective of this study is to take an initiative in filling a gap in the entrepreneurial literature in the emerging economies, deepening the understanding in the complex relationships of how the institutional environment influences the impacts that foreign direct investment (FDI) has on development of the local entrepreneurship in an emerging economy context. The study first explores separately the relevant literature in the fields examining the relationships between the institutional environment, FDI and the development of the local entrepreneurship - this insight is used to build up a picture of the literature findings in the field. The literature findings are then validated by an empirical research, including a cross-country comparison of two different emerging economies, Tanzania and Vietnam.

The empirical research in the exploratory study is constructed as a multiple-case study, including cross-case comparison of the two named emerging economies. The field data has been gathered at many levels in the case countries, including focus group interviews representing various stakeholder groups, company visits and interviews, gathering of observational data, and finally, workshops building on the initial field findings with various local stakeholder groups. Additionally, various relevant data sources have been cited in the form of a supportive desktop study.

The research validates several literature findings in the emerging economy context. The institutional environment has an important role, firstly, in attracting FDI inflows, and secondly defining the FDI strategies the MNEs follow in their market entry. The mode of entry and strategy defines to a far extent the amount of linkages and spillovers that are potentially generated between the MNEs and local entrepreneurs. Thirdly, the institutional environment impacts the extent of how prepared the local entrepreneurs are to exploit the potential FDI spillovers, namely the transfer of managerial and technological knowledge.

The wide scope of the study in relation to the size of the research project causes the main limitation of the study. Combining views of several fields of study in order to develop a bigger picture of the larger entity, the empirical research is slightly limited in depth relative to the scope of the study. Moreover, as the empirical research is limited to two case countries, including two indus- tries in both countries, the generalizability of the study findings to other emerging countries and industries could represent another main limitation of the thesis. However, the positive correlation of the cross-case comparison findings with the literature findings supports the applicability of the research outcomes also in other emerging economies and industries.