Abstract
The purpose of this paper was to investigate and analyze the negative impact of emerging economies’ institutional challenges on western multinational corporations (MNCs) operating there. The content analysis methodology was used. The paper reveals that emerging markets’ institutional voids affect western MNCs in terms of cost of doing business, strategy development and overall competitiveness. The conclusions derived from the analysis is that despite emerging economies investment opportunities, rapid economic and demand growth, their competitive landscape can negatively impact western MNCs ability to succeed in these markets. This is due to imprudent policies and inadequate governance structures implemented by emerging market policymakers. The article begins with a brief introductory background of emerging economies. This is followed by objectives of the paper, research method, and the theoretical underpinnings for the motivations of western MNCs to pursue overseas markets in emerging economies. It then provides an analysis of the role and significance of emerging economies in the global economy. This is followed by a critical review of MNCs strategies in emerging markets, and effects of emerging market institutional challenges on MNCs. Then, the implications for MNCs competitiveness in emerging markets are examined. Finally, recommendations for success for both prospective and current MNCs doing business in emerging economies are explored.
Highlights
Over the past decades, policymakers in Asia, Latin America, Africa, and the Middle East have implemented economic reforms that promote economic openness and free-market liberalization (Hoskisson et al 2000)
Despite the large demand and economic growth in emerging economies and their embrace of market liberalization, these countries are still characterized by some institutional voids that lead to an unlevelled playing field and different rules for economic actors (North, 1990) than those of developed economies. (Dominguez et al, 2016)
The analytical approach utilized in this paper provide insights into the institutional environment in emerging markets
Summary
Policymakers in Asia, Latin America, Africa, and the Middle East have implemented economic reforms that promote economic openness and free-market liberalization (Hoskisson et al 2000) These nations are called emerging market economies. Despite the determination of policymakers to embrace free-market capitalism, they are characterized by government’s interference, political volatility, and inadequate property rights protection (Meyer et al 2009). Despite these institutional weaknesses, emerging markets can provide opportunities for many multinational corporations seeking markets in these countries (Hoskisson et al 2000). Despite the large demand and economic growth in emerging economies and their embrace of market liberalization, these countries are still characterized by some institutional voids that lead to an unlevelled playing field and different rules for economic actors (North, 1990) than those of developed economies. (Dominguez et al, 2016)
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