International technology transfer through local business linkages: the case of Volvo Trucks and their domestic suppliers in India

Using unique firm‐level data from Volvo Trucks and their 64 manufacturing suppliers in India, this paper focuses on the significance of technology transfer from transnational corporations (TNCs) to their domestic suppliers in developing countries. Our case study shows that a relatively small number of international follow‐source suppliers have captured a dominant part of Volvo's local purchases of components, reducing the opportunities for domestic suppliers to forge business linkages with this foreign TNC. At the same time, the domestic suppliers, as well as the follow‐source suppliers, seem to improve their internal capabilities from the technological assistance given by Volvo as part of their business relationships. Even a simple assembly operation by a TNC seems to generate important linkages and technological upgrading among domestic suppliers, thus enhancing their domestic and international market positions. Volvo's technological assistance to domestic suppliers was also transferred down in the supply chain, contributing to long‐term improvements among the smaller companies that make up the lower tiers of the Indian auto‐component sector.