Emerging Economy Multinationals Research Articles

Strategic Configurations and International Performance of Emerging Economy Multinationals

ABSTRACTThis study examines the international performance of emerging economy multinational enterprises (EMNEs) from a strategic configuration perspective. We propose that the strategic patterns of EMNEs that deliver growth and/or profitability are characterized by different configurations of environment, strategy, and managerial resource factors. Therefore, identifying and assessing strategic configurations is key to understanding EMNEs’ international performance. Employing fuzzy-set qualitative comparative analysis, we analyze a multi-sourced dataset of Chinese firms’ outward investment and identify multiple equifinal strategic configurations that are associated with superior international performance in terms of sales growth and/or profitability. These findings inform the development of a taxonomy of EMNEs’ strategic configurations corresponding with three performance groups, namely profitable growth, profitable niche, and poor performers.

The impact of differences in internationalization processes on innovation by emerging economy firms

PurposeThe purpose of this paper is to study the differences in the internationalization process of firms from emerging economies and the impact of their international expansion related choices on the nature of technological innovations developed by these firms. Specifically, the authors compare two principal perspectives on internationalization – the incremental internationalization process (slow, gradually increasing commitments using greenfield investments to similar host countries) and the springboard perspective (aggressive, rapidly increasing commitments using mergers and acquisitions to advanced host countries).Design/methodology/approachBuilding on key differences between the incremental internationalization and springboard perspectives, the authors argue that differences in the speed and mode of entry, as well as the interaction between the mode of entry and location of internationalization, will lead to differences in the types of technologies (mature versus novel) developed by emerging economy firms. The authors examine the hypotheses using panel data from 1997 to 2013 on emerging economy multinationals (EMNEs) from the Indian bio-pharmaceutical industry.FindingsThe findings suggest that firms internationalizing at higher speeds and using cross-border M&As tend to have innovations in mature technologies. The interesting findings can be explained by the challenges faced by emerging economy firms in experiential learning and the assimilation of external knowledge. In addition, the authors find that internationalization to technologically advanced countries weakens the relationship between cross-border M&As and innovation in mature technologies, suggesting that direct learning from technologically advanced environments may help alleviate the assimilation challenges of cross-border M&As.Originality/valueThe authors advance literature on EMNE internationalization by comparing the impact of their choice of internationalization approaches (incremental internationalization or springboard approach) on their innovation performance. The authors contribute to literature on EMNEs that has focused on the determinants of internationalization by identifying the learning implications of internationalization. The authors contribute to the nascent stream of literature on the level of innovation and catching up by EMNEs by performing a fine-grained analysis of the nature of technology innovation.

UNDERSTANDING INTERNALIZATION THEORY AND MULTINATIONAL ENTERPRISES FROM EMERGING ECONOMIES IN BUSINESS HISTORY PERSPECTIVE

This review paper is focused on applying and advancing the Internalization theory to address some of the most current gaps. This paper draws together and synthesizes the lessons learned from the various papers on internalization theory integrated with a business history perspective in this special issue.The review, therefore, is providing a comprehensive understanding of the internalization theory and how it will accommodate the issue of multinationals from emerging economies. To this end, the core point of this paper review focused on demonstrating how to better understand internalization theory and to show how the general internalization theory could be applicable in emerging economy multinationals. While discussing internalization theory and emerging multinationals important insights revealed complementing the business theory with business history to rethink using this two for current business phenomena. Finally, the paper discusses potential avenues for future research and conclusions.

Does Knowledge from Home Markets Boost Outward Foreign Direct Investments of Emerging Economy Multinationals? Evidence from Indian Family EMNEs

Despite increasing research on multinationals from emerging economies (EMNEs), our understanding of the antecedents of their international expansion is still limited. In this study, we seek to examine whether knowledge gained from operating in their complex and diverse domestic markets deter or aid the outward foreign direct investments of EMNEs. As family firms are dominant in emerging economies, we further explore how heterogeneity within family firms moderate this relationship. We conduct our investigations using a proprietary longitudinal dataset comprising 213 EMNEs from India featuring in the S&P Bombay Stock Exchange (BSE) 500 index covering a six-year period from 2007-08 to 2012-13, of which 175 were family EMNEs and find supporting evidence for our theoretical predictions.

Focused and ambidextrous catch-up strategies of emerging economy multinationals

Many emerging economy multinationals (EMNEs) conduct asset-seeking foreign direct investment as a strategy to catch up to global market leaders. This catch-up strategy can be implemented in a focused (purely exploratory) or ambidextrous (simultaneously exploratory and exploitative) manner. This study examines the influence of industry environment on EMNEs’ adoption of these catch-up strategies. Integrating an industry-based view with an upper-echelon perspective, we argue that industry munificence promotes a focused catch-up strategy but hinders the ambidextrous alternative. These opposing effects are further magnified by the functional diversity of EMNEs’ managerial teams because functionally diversified teams are more likely to allocate attention to external cues in the industrial environment, as opposed to forming a unified strategic orientation internally. Using a panel of EMNEs from China over the period of 2005–2010, we find strong support for our main effects of industry munificence on both catch-up strategies and the moderating effect of managerial team’s functional diversity towards ambidextrous catch-up strategy.

Balancing local and international knowledge search for internationalization of emerging economy multinationals

PurposeInternationalization has emerged as a vital catch-up strategy for firms in emerging markets. Although external knowledge search has been widely acknowledged as an important way within the internationalization process, there appear to be opposing views as to whether local or international knowledge search contributes more for firms’ internationalization. This paper aims to integrate organizational ambidexterity and external knowledge search theory to define the concept of external knowledge search ambidexterity and empirically test the impact of the balance dimension of external knowledge search ambidexterity and combined dimension of external knowledge search ambidexterity on internationalization and the moderating effect of organizational slack and environmental munificence.Design/methodology/approachSurvey.FindingsBased on survey data of 219 Chinese manufacturing firms, the authors find that both relative balance and combined dimensions of external knowledge search ambidexterity are positively associated with internationalization. Organizational slack and environmental munificence both negatively moderate the relationship between balance dimension of external knowledge search ambidexterity and internationalization, both positively moderate the relationship between combined dimension of external knowledge search ambidexterity and internationalization.Practical implicationsIt is essential for managers to take different external knowledge sources into consideration, so as to both maximize revenues and profits from advanced technological knowledge and foreign marketing knowledge in foreign markets and geographic proximity advantages in local market, while minimizing the risks of lacking of adaptive capacity for lacking of knowledge about international markets and cost of coordination and communication because of long geographical distance and cultural difference.Originality/valueThe findings help us better understand the knowledge seeking activities of emerging economy multinationals by proposing that the balance and combination of local and international knowledge search both can promote internationalization, especially on the background of China. The results also enrich the organizational ambidexterity research and extend it to external knowledge search field.

Stigma Avoidance and the Delay of Foreign Exits of Emerging Economy Multinational Enterprises

When a foreign subsidiary fails to meet expectations, how quickly will investors pull the plug and withdraw? We argue that the phenomenon of stigma avoidance induces some types of emerging market multinational enterprises to delay divestments of foreign operations. Specifically, we argue that the risk of a stigma of failure creates pressures on managers to retain a business, even at the expense of profitability. Integrating the concept of stigma with institutional theory, we explore variations across firms in different ownership types. A stigma of failure is more likely to be damaging to managers in state-controlled firms (compared to private enterprises) and in family firms (compared to individual-controlled firms). In these types of firms, the impact of stigma avoidance is magnified by ownership concentration, status awareness of the chief executive officer (CEO), and the importance of status in the national culture.

Being Credited while Being Censured: Multinationality and Sustainability of EMNEs

Based on the liability of origin and the attention-based view of firms, we examine how the international business of emerging economy multinationals (EMNEs) affects their corporate sustainability (...

Catch-Up and Leapfrogging: Emerging Economy Multinational Enterprises on the Global Stage

Over the past decade, emerging economy (EE) multinational enterprises (MNEs), especially from China, have been aggressively catching up with global leaders, often by acquiring companies in advanced economies. This raises the question if and how theories of the MNE should be adjusted. I argue that the nature of their firm-specific advantages differs and, as a consequence, their motives, strategies, and operations. Also the institutional and policy environment is more complex. Yet, the phenomenon of EE MNEs can largely be explained through appropriate application of existing theories. However, important research questions remain with respect to the implementation of catch-up strategies, the role of the policy environment, and the performance implications.

Risk propensity in the foreign direct investment location decision of emerging multinationals

A distinguishing feature of emerging economy multinationals is their apparent tolerance for host country institutional risk. Employing behavioral decision theory and quasi-experimental data, we find that managers’ domestic experience satisfaction increases their relative risk propensity regarding controllable risk (legally protectable loss), but decreases their tendency to accept noncontrollable risk (e.g., political instability). In contrast, firms’ potential slack reduces relative risk propensity regarding controllable risk, yet amplifies the tendency to take noncontrollable risk. We suggest that these counterbalancing effects might help explain prior ambiguous findings on the relationship between experience, slack, and FDI decisions. The study provides a new understanding of why firms exhibit heterogeneous responses to host country risks, and the varying effects of institutions.

Managing talent in emerging economy multinationals: integrating strategic management and human resource management

Having established their first overseas operation, the next big challenge for many emerging economy multinational enterprises (EMNEs) is to align their HRs with their strategic ambition. Their lack of internationally experienced talent has become a major obstacle to strategy implementation: they need to fill leadership roles with international responsibility based abroad and at home, and they need to develop talent for future international leadership roles. The key challenge for catch-up strategies thus is to attract, develop, and retain talents who can lead international operations. In this paper, we develop a research agenda on strategic management and HRM in EMNEs that aims to explain the obstacles EMNEs face and facilitates the development of better talent management practice. In particular, we propose to integrate strategic management and HRM perspectives not only to advance theories but to enhance the relevance of both lines of scholarship to practice.

The Role of Local Context in the Cross‐border Acquisitions by Emerging Economy Multinational Enterprises

This paper explores the role of local context in cross‐border acquisitions by emerging economy multinational enterprises (EMNEs). It argues that the importance of local context has remained despite the increased global integration of the world economy. Hypotheses are tested using data on Indian acquisitions hosted in 70 countries over an eight‐year period. Results, which are consistent across number and value of cross‐border acquisitions, show that the local context in host countries offers contrasting benefits. Emerging economy multinational enterprises exploited these benefits by embedding in host countries through acquisitions. The acquisition strategy is conventional in the motives underpinning internationalization, but novel in its geographical clustering of host countries, and idiosyncratic owing to the EMNE's ability to draw on home country embeddedness. The paper develops theoretical implications and extends the concept of embeddedness, treating it as a series of internalization or quasi‐internalization decisions across a variety of local contexts by multinationals.

Technological innovation and emerging economy multinationals: the product cycle model revisited

This paper challenges the continuing validity of three distinct propositions of the product cycle model of Vernon (1966, 1979) or its extension to Third World Multinationals by Wells (1983, 1986). This is in light of recent developments in the role of rapidly evolving technological capabilities in the emergence and evolution of MNCs from emerging economies (EMNCs). The model states that EMNCs have a narrow scope for innovation confined to imitating and adapting the innovation of the technologically leading companies as standardisation proceeds in the product life cycle. It also proposes that innovations are almost always located in the home country of national firms. Furthermore, firms exploit through international operations their unique home country-derived technological advantages. In challenging these product cycle propositions, the paper builds the case for the increasing relevance of the concepts of localised technological change and technological accumulation in explaining the rapidly evolving technological capabilities of EMNCs.

Technological innovation and emerging economy multinationals: the product cycle model revisited

This paper challenges the continuing validity of three distinct propositions of the product cycle model of Vernon (1966, 1979) or its extension to Third World Multinationals by Wells (1983, 1986). This is in light of recent developments in the role of rapidly evolving technological capabilities in the emergence and evolution of MNCs from emerging economies (EMNCs). The model states that EMNCs have a narrow scope for innovation confined to imitating and adapting the innovation of the technologically leading companies as standardisation proceeds in the product life cycle. It also proposes that innovations are almost always located in the home country of national firms. Furthermore, firms exploit through international operations their unique home country-derived technological advantages. In challenging these product cycle propositions, the paper builds the case for the increasing relevance of the concepts of localised technological change and technological accumulation in explaining the rapidly evolving technological capabilities of EMNCs.

Integration by Emerging Economy Multinationals: Perspectives from Chinese Mergers and Acquisitions

The integration process of international mergers and acquisitions by emerging economy multinationals is fraught with challenges of liabilities of foreignness and country of origin. We use insights from institutional theory and draw on the experience of Chinese international mergers and acquisitions to explore these challenges faced by emerging economy multinationals during postmerger integration. We find that these challenges, which are primarily caused by informal institutional differences, can be overcome by developing organizational capabilities for integration and employing mechanisms for appropriate control and justice during the integration process. The study contributes to the ongoing discussions about the relevance of sociocultural influences in the successful integration of international mergers and acquisitions. Our framework proposes initiatives that managers from emerging economies can take to overcome postmerger integration challenges. © 2016 Wiley Periodicals, Inc.

Towards a Framework of Reverse Knowledge Transfer by Emerging Economy Multinationals: Evidence from Chinese MNE Subsidiaries in the United States

Towards a Framework of Reverse Knowledge Transfer by Emerging Economy Multinationals: Evidence from Chinese MNE Subsidiaries in the United States

The Competitiveness of Business Groups and Their Affiliates in International Operations

Abstract The discourse on the competitiveness of emerging economy firms continues with globalization. This paper joins the dialogue by providing a framework of the competitiveness of business groups and their affiliates in international operations. The goal is to address the vast literature on emerging economies that remains short in providing the theoretical background on the competitiveness of emerging and transitioning economy firms. To do this, this study used a critical review and analysis of the literature. It offers some propositions to illustrate the applicability of the framework in analyzing the international expansion of business group affiliates across borders. Ultimately, the paper contributes to the literature on managerial capabilities and competitiveness of firms to sustain their operations as the new emerging economy multinationals.

Contesting a Place in the Sun: On Ideologies in Foreign Markets and Liabilities of Origin

This paper explores the role of ideology in attempts to influence public policy and in business representation in the EU–China solar panel anti-dumping dispute. It exposes the dynamics of international activity by emerging-economy multinationals, in this case from China, and their interactions in a developed-country context (the EU). Theoretically, the study also sheds light on the recent notion of ‘liability of origin’, in addition to the traditional concept of ‘liability of foreignness’ explored in international business research, in relation to firms’ market and political strategies and their institutional embeddedness in home and host countries. Through a qualitative analysis of primary and secondary materials and interview data with key protagonists, we provide a detailed evolution of the case, the key actors involved and their positions, arguments and strategies. This illustrates the complexities involved in the interaction between markets and ideologies in the midst of debates regarding different forms of subsidy regimes for renewable energy, free trade versus protectionist tendencies by governments, and the economic and sustainability objectives of firms and societies. The case shows how relative newcomers to the EU market responded to overcome a direct threat to their business and became, with support from their home government, active participants in the public debate through interactions with local commercial partners and non-governmental organisations. Firms adopted relatively sophisticated strategies to reduce their liabilities vis-à-vis host-country institutions and local stakeholders, including collective action, to increase their legitimacy and reputation, and counter ideologically based attacks. We also discuss implications and limitations.

Multinational enterprises from emerging economies: what theories suggest, what evidence shows. A literature review

The phenomenon of Emerging Economy Multinational Enterprises (EMNEs) and their internationalization process have sparked the debate over the appropriateness of International Business theories to study EMNEs’ internationalization processes. The literature has extensively investigated what distinguishes EMNEs from Advanced Country Multinational Enterprises (AMNEs). This review summarizes and discusses some of the issues that have mostly attracted scholarly debate in this research area. We discuss the specificities of EMNEs: how they differ from AMNEs with respect to three very important and well studied topics: first, country-specific and firm-specific advantages; second, motivations for investing abroad; and third, different modes of entry into foreign markets. We conclude that EMNEs do differ from AMNEs, although these differences may be contingent and transitory.

The Springboarding EMNE: Transformational Leadership and Organizational Resilience

We adopt a Positive Organizational Studies (POS) perspective to shed light on how springboarding - emerging economy multinationals (EMNEs) aggressively acquiring strategic assets in advanced economies – is successfully accomplished. We argue that transformational leadership of the top management team (TMT) of the acquiring EMNE fosters the cognitive antecedents of joint resilience with the TMT of the acquired firm, viz. shared tempered efficacy, collective identity and distributed mindfulness. These factors, in turn, help the post-acquisition entity to leverage the upside of distance – chiefly, diversity, which leads to novel opportunities and knowledge – and to mitigate the downside of distance, especially EMNEs’ legitimacy deficits.