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130 Outward Foreign Direct Investment by Enterprises from Singapore market expansion, as long as the core and highestvalue activities remain in Singapore. The EDB also has an investment arm that acts as the “visible hand” of the Government in promoting the productivity, innovation and competitiveness of companies in Singapore through different policy measures and incentives. F. Conclusion Singapore is an established outward investor among the developing economies. It is the second largest outward direct investor after Hong Kong (China). The geographical spread of Singapore OFDI extends to many regions and countries. While most of the major OFDI activities are associated with large Singaporean companies, more Singapore SMEs are also investing abroad for similar reasons. OFDI by Singapore SMEs is in most cases through greenfield and joint venture activities rather than cross-border M&A. Because of their financial positions and scale of their operations, SMEs from Singapore remain interested in regional markets rather than global markets, but the larger enterprises are investing as far afield as Europe, the Middle East and Africa. There is clearly a growing awareness among Singapore enterprises of the importance of competing in the global economy through direct presence in host countries. The main motives for Singaporean firms’ internationalization include: • The country's limited domestic market is a very significant “push” factor in propelling Singapore enterprises to expand their markets abroad. • Singapore’s role as an international financial centre has contributed to the availability of capital for internationalization, and access to good information on foreign markets has proved crucial to successful OFDI. The Singapore Government plays a significant role in promoting OFDI. The direct presence of several government agencies (e.g. EDB and IE Singapore) in key markets further offers assistance and guarantees to Singaporean investors. This institutional support is far more effective in facilitating OFDI than are incentives per se. Since 1993, OFDI from Singapore has helped increase the competitiveness of Singaporean firms and the Singapore economy. Through OFDI, Singapore companies have gained better access to competitive markets, and/or acquired sophisticated technological knowledge and managerial skills. The analysis of selected cases of Singapore enterprises reveals that a significant proportion of their revenues and assets are related to OFDI activities. Two thirds of firms investing abroad surveyed confirmed that OFDI had increased their competitiveness. OFDI had contributed to increasing familiarity and experience with international business, which enhance firm-specific assets, including improving the reputation and brand image of Singaporean enterprises. This internationalization process has also helped strengthen managerial and marketing expertise and market access. Like the large enterprises, SMEs from Singapore have benefited from the regionalization of their operations. SMEs are able to sustain their cost competitiveness through their manufacturing presence in nearby countries within the region. They have invested within the Asian region, focusing primarily on such low-cost destinations as China, Indonesia, Malaysia, Thailand and Viet Nam. OFDI has also played a critical role for Singapore SMEs to continue to support their main customers overseas, and allowed others to develop new markets in the host countries. As SMEs find it increasingly difficult to expand their markets in Singapore, they begin to look for more business opportunities in the Asian region. Their operations focus on producing for their large customers locally. However, over time, they have diversified into other business activities such as property development and trading. This unexpected diversification in business activities has provided Singaporean SMEs with a new avenue for business growth and development.
Athanassiou, Nicholas and Nigh, Douglas (2000). “Internationalization, tacit knowledge and the top management teams of MNCs”, Journal of International Business Studies, vol. 31, no. 3, pp. 471-87. Blomstermo, Anders and Sharma, D. Deo (eds.) (2002). Learning in the Internationalization Process of Firms, Cheltenham: Edward Elgar. Chan, Chin Bock (ed.) (2002). Heart Work: Stories of How EDB Steered the Singapore Economy from 1961 into the 21st Century, Singapore: EDB. Dunning, John H. (1998). “Location and the multinational enterprise: a neglected factor?”, Journal of International Business Studies, vol. 29, no. 1, pp. 45-66. Grazia, Ietto-Gillies (2005). Transnational Corporations and International Production: Concepts, Theories and Effects, Cheltenham: Edward Elgar. IE Singapore, website: http://www.iesingapore.gov.sg, Koh Buck Song (ed.) (2002). Heart Work: Stories of How EDB Steered the Singapore Economy from 1961 into the 21st Century, Singapore: EDB. Kulwant Singh and Ang Siah Hwee (1998). The Strategies and Success of Government Linked References CHAPTER X 131 Corporations in Singapore, Research Paper Series #98-06, Faculty of Business Administration, National University of Singapore, Singapore. Linda Low, Toh Mun Heng, Soon Teck Wong, Tan Kong Yam and Helen Hughes (1993). Challenge and Response: Thirty Years of the Economic Development Board, Singapore: Times Academic Press. Ministry of Finance (1993). Interim Report of the Committee to Promote Enterprise Overseas, May, Singapore: Ministry of Finance. Nohria, Nitin and Ghoshal, Sumantra (1997). The Differentiated Network: Organizing Multinational Corporations for Value Creation, San Francisco, CA: Jossey-Bass. UNCTAD (2004). World Investment Report 2004: The Shift Towards Services. New York and Geneva: United Nations. Yeung, Henry Wai-chung (2002). Entrepreneurship and the Internationalization of Asian Firms: An Institutional Perspective, Cheltenham: Edward Elgar. Yeung, Henry Wai-chung (2004). Chinese Capitalism in a Global Era: Towards Hybrid Capitalism, London: Routledge.
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