EMBEDDED IN HOST ECONOMIES? : THE CASE OF SINGAPOREAN FIRMS IN THE GROWTH TRIANGLE

Abstract

The recent unravel of the concept "embeddedness" has stirred up interest in many researchers on the social aspect of economic activities. In addition, it has also initiated more studies to be carried out on the economic embeddedness of firms. However, most of these studies concentrate on the phenomenon in the developed world. Hence, this academic exercise is put forward to bridge this gap by examining the degree of embeddedness of firms in the developing countries. The main objectives of this thesis are to examine the degree of embeddedness of Singaporean firms in the Growth Triangle, and hence, their impacts on the host economies. To achieve these objectives, the author employs quantitative and qualitative research through self-administered questionaires and in-depth unstructured interviews to explore the micro-perspective of firms' decision for overseas business ventures and its influence on the embeddedness of firms. A target of 50 manufacturing firms was chosen for study, from which, a response rate of 42% was achieved and only 38% of the respondents was willing to be interviewed. Data from the surveys were analyzed using charts and tables to reflect the firms' motives to invest, their degree of embeddedness using the 7 variables (e.g. employment, geographical location, capital outlay, functions of subsidiary in corporate hierarchy, R & D activities, technology transfer, local sourcing), and perception of their contribution to the host economies. The analysis suggests that Singaporean firms' motives in investing in the Growth Triangle involve both economic and social dimensions. They are considered to be fairly embedded in the Growth Triangle, with firms in Johore having higher embeddedness than their Batam counterparts. Subsequently, this embeddedness contributes to the host economies through employment creation, improved standard of living, growth of indigenous firms and so on. The host economic climate and investment policies also influence the strategy of Singaporean firms which will decide the types and degrees of their embeddedness in the host economies. The findings highlight the crucial role of governments effectively promoting higher degree of embeddedness among Singaporean firms through a comprehensive package of incentives and policies so that they can contribute more positively to the local economies.