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ABSTRACT
The motorcycle industry in Vietnam provides an exemplary case study of industrial development driven predominantly by foreign direct investment (FDI). This chapter analyzes how foreign investors sought rents and market access in the Vietnamese motorcycle industry and how competition between Japanese and Chinese manufacturers led to industrial upgrade among local firms in Vietnam. Using the developmental rent-management analysis, the chapter evaluates the rent-management mechanisms that forced development of a local value chain and Vietnamese firms’ participation in the foreign supply network. The analysis suggests, first, that the process of technology transfer from foreign investors does not take place voluntarily or automatically. Learning rents provided to foreign investors from the government must include conditions requiring transfers of foreign technology and production know-how to local firms. Second, in the absence of influential domestic rent seekers, the industry followed an FDI-dominated developmental path. In this process, local firms struggled to overcome market failures, accumulate technical learning, and compete with foreign firms operating in Vietnam. Vietnamese-led firms who dominated the market in early 2000 lost almost all their market share by 2019. The industry’s next phase of development requires more informed and coordinated rent policies to boost technological and organizational capabilities among local manufacturers.
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