Effect of Local Business Culture on SME Outsourcing Choice by TNCs in Uganda

Geoffrey Bakunda
(Makerere University Business School, Kampala, Uganda)

Abstract: Business culture has been reported to be a key influence on business linkage creation between small and medium enterprises (SMEs) and transnational corporations (TNCs) in an economy. TNCs tend to outsource some of their activities to SMEs whose business culture is considered supportive to TNC operations. While strong outsourcing to SMEs in an economy is a major source of SME growth and competitiveness, limited outsourcing to local SMEs reduces their opportunities for growth, competitiveness enhancement and sometimes results in hostility against TNCs. This paper investigates the effect of business culture on TNC outsourcing Choice to SMEs in Uganda. The study uses survey data from TNCs and logistic regression tests to determine the influence of different aspects of SME business culture and workstyles on outsourcing by TNCs. It is established that some aspects of the SME business culture and workstyles are significant predictors of TNC decisions to outsource to local SME partners while some do not. The paper generates managerial and policy implications for promoting SME-TNC business linkages especially in Africa.

Key words: outsourcing; transnational corporations; small and medium enterprises (SMEs); business culture

JEL code: M160