Business Relationships Between Local Firms and MNCs in a less Developing Country : The Case of Libyan Firms

Abstract: International business relationships have been widely researched over the last three decades. Themajor attention of these studies, no matter what their theoretical perspective, concerns the MNCs inthe less developing countries (LDCs). Studies that illustrate how firms in LDCs behave regardinginteraction with MNCs are slim. Therefore, this study focuses on firms in LDCs, namely Libyan firms,and their relationships with MNCs. The study reflects not only on the relationships between the localfirms with MNCs but also the impacts of other interrelated business and non-business units on theserelationships. The study employs business network theory for industrial marketing and develops amodel applicable for studying such a market.The empirical study employs a survey method which examines 60 Libyan firms’ relationships withforeign suppliers containing more than 300 questions. In the empirical part, the study shows that therelationships like technological adaptation, technological cooperation and information exchange wereawarded low values. The measures on the other hand show a high value of impact from the politicalactors and even activities in the contextual environment. The study shows in detail where and howthe political actions influence business relationships. These impacts from the local environment affectlocal firms more than the foreign suppliers, and thus have some bearing on the MNCs and local firms’relationship weaknesses and strengths.The thesis’ conceptual contribution stands on development of new notions in business network theoryby integration of the contextual environment, in other words, network environment, and examinationof their impact on the strength of the focal business relationship. The study further contributesknowledge, not only for firms and politicians in LDCs to understand the consequence of their actions,but also provides deep information for MNCs to understand issues like why firms in LDCs behave ina specific way. Such understandings facilitate the development of cooperation. The study providesinformation about a number of characteristics which are specific for the business networks of such amarket which is dependent on only one resource like oil. While most studies in the field ofinternational business regard the business activities of MNCs, more research is needed to also observethe behaviour of firms from LDCs to gain deeper knowledge on the relationship between the MNCsand local firms from LDCs. The role of political actors and the influence of dependency on one soletype of resources and aspects like change in the prices of this resource seem to be important, but arequite neglected in research in international business.