The evolution of strategic asset-seeking acquisitions by emerging market multinationals

We study the extent to which emerging market multinational enterprises (EMNEs) engage in strategic asset-seeking acquisitions in advanced countries in relation to the strength of their home- and host-country national innovation system (NIS). We suggest that early acquisitions by EMNEs were used to compensate for the EMNEs relatively weak home NIS, and targeted weaker host NIS to limit the cognitive gap EMNEs would need to address. Instead, more recent acquisitions by EMNEs are supported by a stronger home NIS, and target firms in stronger host NIS. We also propose that acquisitions by high-tech (versus non-high-tech) EMNEs need a stronger home NIS due to the technological complexity of the industry, and are limited when the complexity of a stronger host NIS adds to the industry context. We find support for most of our arguments on 179 acquisitions in the Triad by Brazilian, Russian, Indian and Chinese multinationals.     

Liability of emergingness and EMNEs’ cross-border acquisition completion: A legitimacy perspective

This paper contributes to the literature on emerging multinational enterprises (EMNEs) by revealing how the conditions in their home countries influence their cross-border acquisitions. The study focuses on the liability of emergingness (LOE). It develops an integrative theoretical framework based on neo-institutional theory and the concept of legitimacy to explain the relationship between LOE and EMNEs’ cross-border acquisitions completion and the situational conditions that shape this relationship. The study uses data on 27,648 announced acquisitions conducted by EMNEs from 24 emerging economies in 175 host countries to estimate the relationships. The results reveal that, while two types of LOE (economic and institutional) have negative impacts on cross-border acquisition completion, the negative impacts become less important or disappear when the host country’s unemployment rate is too high, and the host country’s institutional quality is too low. This finding suggests that EMNEs can mitigate the negative effect of the LOE by carefully choosing a good time and a suitable location to enter into these transactions.     

EMNEs venturing into advanced economies: Findings from comparative cases of two Indian MNEs

Indian firms are challenged by the latecomer disadvantages faced by emerging‐market multinational enterprises (EMNEs) in general. These challenges notwithstanding, Indian firms are doing cross‐border acquisitions (CBAs) in developed regions. Analyzing firm‐level secondary data of two Indian MNEs—namely, Motherson Sumi Systems Limited and Rain Industries Limited—that show significant developed region–based revenues and assets, we link extant and emerging theoretical perspectives on EMNEs’ internationalization with the observed firm motives and behaviors of our case firms. We propose a framework of multiple contextual settings to understand the context‐driven internationalization of the case firms. Finally, our article offers a set of propositions emphasizing firm‐level entrepreneurial orientation and international orientation, when EMNEs internationalize via CBAs in developed regions. © 2017 Wiley Periodicals, Inc.     

Impact of international entry choices on the nature and type of innovation: Evidence from emerging economy firms from the Indian bio-pharmaceutical industry

As emerging economy multinational enterprises (EMNEs) enter foreign countries in search of new markets, seeking to expand their knowledge bases, research on the type and nature of innovation activity is needed to address the impact of EMNEs’ choices related to international expansion. Building on prior literature on entry mode and location choices, as well as on organizational learning, we argue that how and where an EMNE expands internationally will impact the nature of its innovation. We carry out empirical analysis on a sample of 167 Indian bio-pharmaceutical firms for the period from 1997–2017. Our findings suggest that greenfield ventures foster innovation in core technologies, while cross-border mergers and acquisitions (M&As) foster innovation in non-core technologies. In addition, locating subsidiaries in high income countries encourages product innovations, while locating in low income countries encourages process innovations. Our findings contribute to the growing literature on differences in learning outcomes of EMNE internationalization.     

Emerging market multinationals’ firm-specific advantages,institutional distance,and foreign acquisition location choice

How do emerging market multinational enterprises’ (EMNEs’) firm-specific advantages (FSAs) drive their foreign acquisition location choice? We theorize EMNE FSAs as important contingencies influencing the effect of institutional distance (ID) on EMNE foreign acquisition location choice. As a baseline main effect, we expect ID to positively influence EMNE location choice, as well-developed institutionally distant host-country environments are attractive to EMNEs. This effect is reduced by EMNE FSAs shaped by home-country conditions, such as success in navigating institutional voids and superior human resource management, which are more competitive in institutionally closer countries. Conversely, this effect is heightened by EMNE FSAs shaped by investment choices for knowledge and for international venturing. Based on analyses of 278 EMNE acquisitions by EMNEs from nine emerging markets, our findings largely support our hypotheses. Our study extends research on EMNE FSAs, which often have been compared only with those of developed-country multinational enterprises.     

The effect of home country characteristics on the internationalization of EMNEs: The moderating role of knowledge stock

This paper examines the effect of home country characteristics on the internationalization of emerging market multinational enterprises (EMNEs). Drawing on the institution-based view (IBV), we argue that institutional, political, and social characteristics will positively relate to the internationalization of EMNEs. Further, drawing on the knowledge-based view (KBV), we also argue that a firm’s knowledge stock (KS) will positively moderate the aforementioned relationship. Our research setting involves the incorporation of primary data collected from Iranian multinational enterprises (MNEs) operating in the food and beverage industry. The results provide support for the hypotheses that home country characteristics positively impact the international growth of EMNEs but this does not lead to their further expansion. Also, supported was the hypothesis that EMNEs' knowledge stock positively moderates the relationship between home country characteristics and their international growth. These findings not only contribute to the current knowledge about the drivers of EMNE’s internationalization but also stress upon the idiosyncratic role of home country institutions and the impact of knowledge-specific capabilities on the internationalization of EMNEs, their international growth, and expansion.     

Research on emerging-market multinational enterprises: Extending Alan Rugman’s critical contributions

We summarize Rugman’s contributions to the literature on emerging-market multinational enterprises (EMNEs) and propose directions to extend his work. We first review his work, where he extended his early research on international business theories to understand the nature, positioning, and activities of EMNEs. EMNEs typically exhibit home-based firm-specific advantages (FSAs) yet lack host-based and non-location-bound FSAs. Most of their sales or assets are focused on the domestic market. Given that the goals of EMNEs may conflict with or complement those of their home or host governments, EMNEs either receive government support or face regulatory barriers. We propose several directions for further research: investigating the mechanisms (e.g., international acquisitions) through which EMNEs develop strong FSAs, exploring the strategy and performance of state-owned EMNEs (vs. private EMNEs), and constructing comprehensive datasets to test the strategy and performance of EMNEs.     

International investors’ reactions to cross-border acquisitions by emerging market multinationals

How do international investors react to announcements of cross-border mergers and acquisitions (CM&As) by emerging market multinational enterprises (EMNEs)? Using a unique and manually-constructed firm-level dataset, this paper examines the stock price reactions to CM&A announcements made over the period 1991–2010 by Chinese MNEs listed on the Hong Kong Stock Exchange and the wealth impacts of their corporate governance. Our empirical findings confirm a positive stock price reaction on average, and suggest that international investors react positively to the presence of large shareholders, but negatively to the presence of institutional shareholders. There is a negative impact if the largest shareholder is either the State or the corporate founder. We suggest that this is because the international investors perceive potential principal–principal conflicts in such ownership/control constellations and discount equity prices accordingly. We also find that Board size and independence have positive effects on the price reaction, but that large supervisory boards engender negative reactions.     

Boundary spanners,HRM practices,and reverse knowledge transfer: The case of Chinese cross-border acquisitions

This paper investigates the role of boundary spanners in reverse knowledge transfer in EMNEs’ cross-border acquisitions. Applying a micro-foundational approach and building on boundary spanning as theoretical perspective, we conducted case studies of acquisitions by Chinese companies in Germany and the UK. We find reverse knowledge transfer is a collective endeavour that relies on both the ability and motivation of individual boundary spanners as well as team-based international collaborations. We propose a conceptual framework of reverse knowledge transfer with two mechanisms—enabling and materializing. Their successful implementation depends not only on the personal characteristics of boundary spanners, but on supportive HRM practices.     

Heterogeneity in OFDI by EMNEs: Drivers and trends of Chinese and Indian firms

Previous research has identified a distinction between the internationalization of emerging market multinational enterprises (EMNEs) and their advanced-economy counterparts. However, the question as to whether EMNEs conduct outward foreign direct investment (OFDI) in a uniform manner remains under-studied. Prior studies have grouped together all emerging markets but have ignored the essential heterogeneity of EMNEs that leads to their diverse OFDI patterns and behaviours. In this study, we illustrate the drivers and related phenomena of heterogeneity by exploring differences and similarities between Chinese and Indian MNEs’ OFDI activities, namely, investment destinations (i.e., advanced vs. emerging economies), the level of political relationships with host countries, industry sectors supported by institutional patronage, and the primary motivations of investment projects. We suggest that the heterogeneity in OFDI is the result of the institutional environment and the strategic priorities of the industry sector.     

Strategic ambidexterity and its performance implications for emerging economies multinationals

Emerging market multinational enterprises (EMNEs) are attracting significant scholarly attention in the international business and general management domain. The extant research has provided important insights into the EMNEs’ internationalization processes and whether the existing theories adequately explain their outward investment motives. This special issue aims to provide a platform suited to extend the current understanding of the rapid rise of EMNEs and examine the vital role played by strategic ambidexterity and its performance implications for the EMNEs. The current research on EMNEs has failed to adequately leverage strategic ambidexterity and link it with the post-entry performance of EMNEs. We argue that the strategic ambidexterity perspective offers valuable opportunities to understand the post-entry performance of EMNEs as they expand into developed and developing markets. The article also highlights important areas for future research by taking into account the current COVID-19 pandemic crisis.     

Understanding cross‐border mergers and acquisitions of African firms: The role of dynamic capabilities in enabling competitiveness amidst contextual constraints

This article builds on existing international business literature that examines the drivers of cross‐border mergers and acquisitions (M&As) within emerging and developing economy contexts, theoretically exploring how dynamic capabilities (DCs) are connected to these drivers, and how African emerging multinational enterprises (EMNEs) can pursue them to achieve competitiveness. The article's contribution is the development of a DC framework and testable propositions for African EMNEs' cross‐border M&As. The theoretical framework shows the division of DC dimensions—sensing, seizing, and transforming—and establishes explanations for their linkage with institutional and resource drivers for African EMNEs' cross‐border M&A competitiveness. In addition, the article outlines managerial implications to this effect. Overall, the article contributes to the emerging literature on the international expansion of African EMNEs through cross‐border M&As by underscoring the role of DCs.     

Ownership effects on direction of multinationality: Evidence from Indian EMNEs

An essential yet challenging decision that emerging market multinational enterprises (EMNEs) must make when setting up a subsidiary abroad is whether to do it in developed or emerging market economies. The extant literature has rarely probed what influences the location choice of EMNEs' outward investments. This paper aims to address this gap and hypothesizes that large shareholdings by promoters or foreign institutional investors negate agency problems (due to managerial risk aversion) and enhance the propensity to pursue risky but value-accrediting upmarket strategies. Furthermore, this paper argues that these beneficial effects of large owners are significantly weaker for group-affiliated firms compared to their standalone counterparts. We test our proposed hypotheses using a proprietary, longitudinal dataset during 2007–2013 for 213 Indian multinational firms and find support for our arguments.     

Direction of outward FDI of EMNEs: Evidence from the Indian pharmaceutical sector

This article seeks to add to the small but growing literature of emerging‐market multinational enterprises (EMNEs). Using two linked large firm‐level databases, it seeks to explore the determinants of outward investment of Indian pharmaceutical companies, distinguishing between developed‐ versus developing‐country destinations. It specifically examines the impact of two firm‐level characteristics that embody “non‐OLI” [ownership, location, and internalization] firm‐specific capabilities of EMNEs. The finding of this study is that family firms are keen on investing in other developing countries but much less so in developed countries. However, international linkages in the form of foreign investors offset this. © 2011 Wiley Periodicals, Inc.     

Outward foreign direct investment and domestic innovation performance: Evidence from China

Recent years have witnessed substantial outward foreign direct investment (OFDI) from many emerging economies. Should the governments of these economies encourage OFDI in order to promote domestic innovation? Much OFDI by emerging economy multinational enterprises (EMNEs) has been undertaken to acquire strategic assets overseas, but do these acquisitions bring innovation benefits at home? The empirical analysis presented in this paper considers the effects of OFDI on regional innovation performance, using a panel of Chinese provinces, and finds that OFDI has a very significant impact on domestic innovation. Furthermore, we also identify three contingent factors – absorptive capacity, foreign presence, and the competition intensity of the local market – that moderate the impact of OFDI on innovation performance.     

Subsidiary capability upgrading under emerging market acquirers

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.     

The stock market performance of exploration-oriented and exploitation-oriented cross-border mergers and acquisitions: Evidence from emerging market enterprises

This study builds on insights from mergers and acquisitions (M&A) studies and the perspective that stock market performance is affected by the M&A strategies of firms. Past studies show that acquisitions are an effective way to exploit existing knowledge and explore new possibilities. We argue that stock market performance can be a response to exploration/exploitation strategies in the context of cross-border M&As by emerging market multinationals. Based on cross-border M&A data of Chinese multinationals, we find that exploration-oriented acquisitions have worse stock market performance than exploitation-oriented acquisitions. Furthermore, we find support for our premise that acquiring firms can reduce the risk of exploration-oriented acquisitions by having more high-discretion slack resources or by maintaining a high level of equity share of the target firm. In addition, acquiring firms perform better if they conduct exploration-oriented acquisitions in related industries. Our results contribute to a better understanding of exploration and exploitation in the context of M&As.     

中国跨国公司的市场产权问题研究

市场产权理论是继产权理论之后,近几年来一些学者提出的重要理论,受到国内外学者的普遍关注。但市场产权在其内容、主体及来源上均有商榷之处。因为市场主体不只是国家,还可以是企业,特别还可以是跨国公司。因此,跨国公司要扩张和发展,获取市场产权更有重要意义。根据国际经验,中国跨国公司可以通过投资结构的改变、技术控制、品牌控制及跨国并购来获取市场产权。但根据中国的实际情况,还应采取综合运用各种途径、培植知识产权扩张实力、利用两个市场并打好本土化的基础以及深化市场产权的体制改革等对策来获取市场产权,从而促进中国跨国公司的扩张。     

Is the cure worse than the disease? The effect of emerging market MNEs on host country corruption

In recent years, there has been an exponential increase in the amount of foreign investment by emerging market multinational enterprises (EMNEs). While it has been debated whether EMNEs strengthen or weaken the institutions in host countries they invest in, the literature has paid limited attention to how EMNE investment impacts corruption in other emerging markets, one of the most significant destinations of EMNEs. Following Hoskisson et al. (2013), we categorize two types of emerging markets as targets of EMNE investment, a) low-income emerging markets and b) middle-income emerging markets, based on their institutional and market development. Building on the theory of firm-specific advantages (FSAs) and the institutional advantage (IA) of EMNEs, we reason that EMNEs enter foreign markets in accordance to where their skills and competencies can be effectively utilized, and this impacts corruption in the host country. We make two key arguments: (1) EMNEs predominantly use their IA in low-income emerging markets, which in the long term increases corruption in the host market, and (2) EMNEs predominantly use their FSAs to gain competitive advantage in middle-income emerging markets, which decreases corruption in the host market. Empirical analysis of Chinese outward FDI from the 2008-2018 period supports our hypotheses. Our research contributes to both the literature on EMNEs and corruption.     

Following their predecessors’ journey? A review of EMNE studies and avenues for interdisciplinary inquiry

In this review article we take stock of international business (IB) research on emerging economy multinational enterprises (EMNEs) over the past three decades. Our review covers 690 articles published in 64 high-impact peer-reviewed journals between 1990 and 2021 (inclusive). We first present bibliometric findings on some key patterns of this vast body of scholarly work. We then conduct content analysis to critically assess this literature and provide a multilevel synthesis of the existing knowledge base. To do so we propose a theoretical framework that highlights three dimensions – micro-foundations, organizational characteristics, and institutional environment – by which the distinction between EMNEs and their predecessors, namely multinational enterprises (MNEs) from advanced economies, is investigated. At each level, we seek to understand EMNEs’ convergence with and divergence from their predecessors in terms of their motives, strategies/approaches, and outcomes of internationalization. Through this process we identify opportunities to move EMNE research forward through interdisciplinary inquiry, and we propose several avenues for future research.