Abstract
This article leverages a case study of a recent Chinese acquisition in the United Kingdom to explore the upgrading of capabilities in the subsidiaries in developed countries acquired by emerging market multinational enterprises (EMNEs). The seemingly implausible upgrading phenomenon is explained by the EMNEs’ complementary assets, their GVC lead firm positions and the unique power relationship between the acquirer and acquired firms, which enable the EMNEs to ‘impel’ upgrading and encourage ‘co-learning’ in their acquired subsidiaries. The contributions to the literature on EMNEs, global value chains, and organizational learning are outlined and discussed.
Highlights
There has been a recent surge in research on the outward foreign direct investment (OFDI) activities undertaken by emerging economy multinational enterprises’ (EMNEs), including their acquisitions made in developed countries (Buckley et al, 2007; Tung, 2007, 2017; Gubbi, Aulakh, Ray, Sarkar, & Chittoor, 2010; Hennart, 2012; Williamson & Raman, 2011)
We examined capability upgrading in an EMNE-acquired firm in a developed market and the underlying learning process
The results indicate that multiple types of upgrading took place in the subsidiary and that these had been facilitated by the parent firm playing a dual, ‘impeller’ and ‘co-learner’ role shaped by its unique EMNE characteristics and strategy
Summary
There has been a recent surge in research on the outward foreign direct investment (OFDI) activities undertaken by emerging economy multinational enterprises’ (EMNEs), including their acquisitions made in developed countries (Buckley et al, 2007; Tung, 2007, 2017; Gubbi, Aulakh, Ray, Sarkar, & Chittoor, 2010; Hennart, 2012; Williamson & Raman, 2011). The Global Value Chain (GVC) literature acknowledges that upgrading is affected by the governance structure of and power relationships in the value chains In this literature, firms are largely treated as black boxes (Kadarusman & Nadvi, 2013), with little understanding of firm-level learning in the upgrading process (Morrison, Pietrobelli, & Rabellotti, 2008; Hansen et al, 2016). In both the management and GVC literatures, the empirical narrative is dominated by the subsidiaries or suppliers of developed economy MNEs (DMNEs) (e.g., Birkinshaw & Hood, 1998; Cantwell & Mudambi, 2005; Corredoira & McDermott, 2014; Ivarsson & Alvstam, 2011; McDermott & Corredoira,2010), with very little being said about upgrading in EMNE subsidiaries. This paper aims to answer the following research question: how and why can subsidiary firms in developed countries upgrade their capabilities under emergent acquirers?
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