- 1 - 4 th International Conference on Technology Policy and Innovation Curitiba, Brazil, 28 th –31 st August 2000 CAN SMALL FIRMS LEVERAGE GLOBAL COMPETITION? EVIDENCE FROM THE PORTUGUESE AND BRAZILIAN AUTOMOTIVE SUPPLIER INDUSTRIES FRANCISCO VELOSO (1)(2) fveloso@mit.edu CHRIS HENRY (3) cphenry@mit.edu RICHARD ROTH (2) rroth@mit.edu 77 Massachusetts Av., Room E40 – 242 A Cambridge, MA 02139 Tel: (617) 253-6467 MASSACHUSETTS INSTITUTE OF TECHNOLOGY ABSTRACT Automotive assemblers’ global sourcing strategy is pushing their suppliers to have an equally global presence. Until recently this trend was confined to large companies, which expanded their presence to new locations through the exploitation of unique knowledge assets. This movement has a good fit with existing theories of foreign investment. More recently, some of the smaller and often local suppliers are trying to use this trend as a growth opportunity, aiming to gain new business and critical dimension through the establishment of new plants in some of the industry fast growing areas. Unlike the reaction of the large players, the behavior of these smaller firms does not fit well with existing theory. This paper uses a detailed microanalysis of manufacturing cost to explore how the market characteristics of the home base and the new areas condition the investment possibilities of small automotive suppliers. The context analyzed is the decision of stamping and injection molding companies located in Portugal to invest in Eastern Europe or in Brazil. (1) Technology, Management and Policy Program; (2) Materials System Laboratory; (3) Department of Materials Science and Engineering