FDI and the transformation from industry to service society in emerging economies:

A Lithuanian - Nordic perspective

Gediminas Ramanauskas

FOCUS AND OBJECTIVE

The focus of the research is the emergence of new cross-border clusters, which arise from FDI.

The research objective is to analyze the motives and functions of Norwegian FDI in Lithuania from 1990 to present.

KEY WORDS

Foreign direct investment Clusters Knowledge transfer

MOTIVES FOR FDI

PRECONDITIONS FOR CLUSTERS

Source: Adapted from M.E. Porter, “The Competitive Advantage of Nations,” Harvard Business Review, March-April, 1990, p. 77.

RESEARCH METHODOLOGY

Semi-structured interviews of the Norwegian executives who invested in Lithuania were employed.

The interviews consisted of a number of open-ended questions that were followed by customized questions regarding specific details attributed to particular issues.

The transcripts of the interviews were analyzed using an editing approach applied to qualitative data analysis.

Industry association reports, newspaper articles and other published documents were also used.

CASES

(1991) BI Norwegian School of Management: increasing competence;

(1991) The Baltic Investment Company: consulting and hotels;

(1993) Statoil: gas stations; (1998) RIMI: retail.

FINDINGS

None of the cases are examples of outsourcing to a low-cost country in order to produce commodities to the home country or to the international market at a lower price than previously.

The Norwegian investments were driven by the possibilities to become key players within a new market, which was transforming.

CASE OF FURNITURE INDUSTRY (NORWAY & LITHUANIA)

In 2001 There were 506 producers of furniture in

Norway, and only 3 of these companies employed more than 200.

There were around 200 producers in Lithuania, and 10 largest companies produced almost half of the total furniture.

LITTLE SUNNMORE:CROSS-BORDER CLUSTER

40 percent of all employees in Norwegian furniture industry are employed in the county Møre and Romsdal, which Sunnmøre is a part of.

From the interwar years the district had different service organizations, marketing organizations and training institutions related to the furniture industry.

In 2002 Hove Møbler followed by Hjellegjerde Møbler (Sunnmøre) moved production to Panevezys (Lithuania): “Little Sunnmore” .

NORWEGIAN EXPERIENCE

The investments in furniture production in Lithuania were originally done as outsourcing to take advantage of low labour costs.

After a short period of time the Norwegian furniture companies became surprised when they discovered that the competence within Lithuanian furniture industry was higher than they expected.

Advantages of investing in Lithuania: general positive attitude towards new technology, high level of education and hard-working labour force.

THE ROLE OF NORWEGIAN STATE

SND & SIVA: institutions that the Norwegian state has been using to promote start-ups and to diffuse business and technical knowledge to private industries.

CONCLUSION

The experience of the Norwegian investors indicates that there is an increasing tendency of developing business relationships based on the idea of exchanging knowledge and taking advantages of local competence rather than of lower labor costs.

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