MNEs as catalysts of productive entrepreneurship: the case of Egypt

The 2030 Agenda assigns multinational enterprises (MNEs) and other private businesses a pivotal role for the pursuit of economic development, and depicts the formal establishment of new enterprises and their growth as major components of this endeavor (Target 8.3). The extant research has investigated the role of MNEs in strengthening local suppliers. However, our understanding on the role of MNEs in the creation of new firms remains limited, especially in the context of developing economies. This chapter explores the link between foreign MNEs and indigenous entrepreneurship, by focusing on the role of vertical business linkages and distinguishing between three types of linkages: international suppliers, established domestic suppliers, new domestic suppliers. We employ a multiple case study approach to conduct an exploratory analysis of the mechanisms underlying the creation of business linkages between foreign MNEs and new domestic suppliers. Our sample is composed of six Italian MNEs operating in Egypt. Our evidence suggests that vertical business linkages may lead to the emergence of new enterprises, provided that three conditions occur: (i) a major change in markets, regulations or technologies; (ii) a generational leap in the human and social capital in the host country; (iii) MNEs' attention to the sustainability of the supply chain. Specifically, we show that discontinuities and orientation to sustainability are necessary to reshuffle the advantages of international vs. domestic and established vs. new suppliers. Our results offer some theoretical and empirical justifications for the involvement of MNEs in the multi-stakeholder partnerships for sustainable development (Target 17.16).