LAUSR

ABSTRACT This article analyses how foreign direct investment drives technological upgrading in the motorcycle industry in Vietnam. Using the analytical framework of rent management, the article evaluates the rent management mechanisms that provided the incentives and pressures for domestic firms to develop a local value chain by participating in the foreign supply network. This article offers a case study analysis of two periods: 1995–2000 and 2000–05. Two case studies examine the exchanges between lead firms and their suppliers; between multinational corporations and local firms; and among the state, private and foreign firms in the context of the value chain for motorcycle production. The analyses suggest that industrial upgrading has been predominantly driven by foreign direct investment starting in the early 2000s. In addition, market competition among Japanese and Chinese lead firms led to significant technical learning for domestic firms through collaboration with foreign firms despite the government’s failure to effectively monitor rents or implement industrial policies.