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.     

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.     

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.     

Emerging versus advanced country MNEs investing in Europe: A typology of subsidiary global–local connections

This paper empirically investigates how subsidiaries of multinationals from both emerging (EMNEs) and advanced (AMNEs) economies investing in Europe learn from the local context and contribute to it as much as they benefit from it. To explore this we classify the behavior of MNE subsidiaries into different typologies on the basis of how knowledge is transferred within the multinational and on the nature of the local innovative connections. The empirical analysis relies on an entirely new, subsidiary-level dataset in the industrial machinery sector in Italy and Germany. Results show that EMNEs and AMNEs undertake different strategies for tapping into local knowledge and for transferring it within the company. We identify a new typology of EMNE subsidiary that contributes through its significant local innovative efforts to development processes in the host country. This result suggests possible win-win situations from which novel policy implications may be drawn.     

A comparative analysis of location and non-location-bounded strategic asset seeking in emerging and developed market MNEs: An application of new internalization theory

Do emerging market (E)MNEs have a stronger strategic asset seeking FDI orientation than developed market (D)MNEs? If so, what are the properties of the strategic assets they actually seek and are they similar or dissimilar to those of DMNEs? Drawing from new internalization theory, we show that lying concealed within some mainstream EMNE models are important predictions regarding differences in the location-boundedness properties of the strategic assets sought by EMNEs compared with DMNEs. Using multinomial logit modelling on 2414 international M&A deals, we explore how acquirer characteristics shape location-bounded (trademark) and non-location bounded (patent) strategic asset seeking choices. In general, we find evidence that EMNEs have a comparatively stronger patent but weaker trademark seeking orientation than DMNEs. We discuss implications for EMNE related theory, focusing on the qualitative differences in asset seeking orientation between EMNEs and DMNEs.     

Emerging Market Multinationals: Coopetition for Global Growth

Since the dramatic geopolitical shift toward liberalization in the last century, emerging‐market multinational enterprises (EMNEs) have become major players in global markets and continue to account for an increasing share of global foreign direct investment (FDI) flows. Given this trend, the questions of how and why EMNEs pursue FDI deserve greater attention. This article builds on recent work that uses resource dependence theory (RDT) to explain EMNE internationalization strategies. We propose that EMNEs, while often resource deficient relative to their developed‐market competitors and, therefore, more dependent on others in the external environment, are uniquely positioned to overcome these deficiencies over time through simultaneous cooperation and competition—coopetition—with their global rivals and host‐ and home‐country governments. These propositions contribute to the EMNE internationalization literature by more fully incorporating RDT into current theories of internationalization, highlighting the importance of managing dependencies over time to maximize global growth. © 2015 Wiley Periodicals, Inc.     

Do interlocks by different types of directors affect the nature of internationalization strategy of emerging market multinationals?

Research that links boards in general and interlocks in particular with internationalization activities of emerging market multinationals (EMNEs) has recently garnered significant attention. However, a focused examination of the impact of the interlocks of different types of directors on the nature of EMNE internationalization strategy is missing. To address this gap, we use an integrated agency–resource dependence perspective to distinguish board interlocks provided by inside directors from those provided by independent directors to demonstrate their impact on exploratory and exploitative internationalization. We test our hypotheses on 1996 observations of Indian firms between 2011 and 2017. Our results show that while inside director interlocks promote exploitative strategies over exploratory internationalization strategies, independent director interlocks deter exploitative internationalization. Furthermore, these preferences are contingent upon the R&D intensity of the firm.     

Knowledge management of emerging economy multinationals

Knowledge is critical to the survival of emerging economy multinationals (EMNEs), who are confronted by a lack of internal competitive capabilities and external challenges associated with diverse institutional environments. They thus must manage and orchestrate their knowledge globally for ultimate catch up. This article systematically reviews literature concerning EMNE knowledge management using content analysis of 93 articles in 17 leading journals across 7 major disciplines from 2000 to 2020. Applying the antecedent-process-outcome (APO) framework, we identify three major themes: knowledge-seeking strategy, knowledge transfer and innovation. We discuss knowledge frontier issues, directions for future scholarship, and avenues for greater interdisciplinary cross-fertilization.     

Organizational slack as an enabler of internationalization: The case of large Brazilian firms

In this paper, we address an empirical puzzle. We note that a deliberate and serious drive to internationalize has occurred rather late in the evolution of large Brazilian firms. Meanwhile, and despite their late internationalization, these Brazilian firms expanded rapidly and intently. Despite the rich literature on Emerging Market Multinational Enterprises (EMNEs), there is still much contention on what drives rapid EMNE internationalization, particularly for the less explored firms from Latin America. Using an inductive case study of five leading Brazilian MNEs, we bring new insights on this neglected question. We unveil that the existence of organizational slack (of operational, managerial, and financial nature) can indeed facilitate rapid internationalization, particularly when triggered by unique home country conditions (e.g., regulation; rising cost of doing business at home; exhaustion of profitable growth opportunities in the domestic market).     

The complementarity effect of exporting,importing and R&D on the productivity of Ukrainian MNEs

After two decades of research on Emerging Market Multinational Enterprises (EMNE), the debate still concerns the antecedents and strategies of their foreign expansion. However, much less has been said on the effects of international participation on their productivity. Building on insights from the Resource-Based View of the firm and agency theory, we develop hypotheses on the presence of complementarities among export, import and R&D and their impact on productivity. Our empirical analyses on a panel of 23,000 time-year observations of Ukrainian MNEs over the period 2000–2006, confirm that: (i) EMNEs benefit from complementarities stemming from the assimilation and integration of knowledge from international external sources (import and export) with internal knowledge (own R&D investment); (ii) the effect is more pronounced for private-owned enterprises (POEs) rather than state-owned enterprises (SOEs), and (iii) especially when they trade with partners in/from advanced markets.     

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.     

Internalization theory: An unfinished agenda

Internalization theory is usually applied at the firm level to analyse FDI, licensing and subcontracting. This paper extends it to the industry level. It synthesises internalization theory and oligopoly theory. It analyses a global industry where firms innovate competitively, and freely enter and exit the industry. It presents a formal model which highlights the inter-dependencies between rival firms. Each firm responds to its rivals by jointly optimising production and innovation through inter-dependent ownership and location decisions. The competitive outcome determines which firms serve which markets, which firms enter or exit the industry, and the internalization strategy of each firm.     

A resource dependence perspective of EMNE FDI strategy

Using Resource Dependence Theory as a lens, we explore current explanations of how and why Emerging Market Multinationals (EMNEs) seek to compete internationally through Foreign Direct Investment. We find that all three dominant explanations and much of the ongoing literature either explicitly or implicitly highlight the importance of a firm's ability to acquire and maintain resources to its own survival and ability to compete as latecomers on a global stage. Through our conceptual model we show that whether EMNEs seek to exploit existing resources, seek to augment their resource base, or pursue a combination of both it is reflected by their generic internationalization strategy. This generic strategy is also reflective of the firm's strategic focus, as well as predictive of its entry mode and resulting resource dependence. Taking this perspective informs the current literature by clarifying how an internationalization strategy alters EMNE dependence on the external environment for critical resources.     

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.     

Export Market Participation,Investments in R&D and Worker Training,and the Evolution of Firm Productivity

This paper uses micro panel data for firms in the Taiwanese electronics industry in 1986, 1991 and 1996 to investigate a firm's decision to invest in two sources of knowledge – participation in the export market and investments in R&D and/or worker training – and assess their effect on the firm's future productivity. The firm's decisions to export and invest in R&D and/or worker training are modelled with a bivariate probit model that recognises the interdependence of the decisions. The effect of these investments on the firm's future productivity trajectory is then modelled while controlling for the selection bias introduced by endo‐genous firm exit. The findings indicate a significant interaction effect between exporting and R&D investments and future productivity, after controlling for size, age and current productivity. Firms that undertake both investment activities have significantly higher future productivity than firms that do one or neither. In addition, these firms are more likely to continue investing in these activities leading to further productivity gains. These findings are consistent with the hypothesis that export experience is an important source of productivity growth for Taiwanese firms and that firm investments in R&D and worker training facilitate their ability to benefit from their exposure to the export market.     

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.     

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.     

The Impact of Corporate Social Responsibility Disclosure on Financial Performance: Evidence from the GCC Islamic Banking Sector

We examine corporate governance diversity within a Coasian framework of stakeholder rights, where the central role of governance is to ensure that necessary firm-specific investments are made. This Coasian perspective on stakeholder theory offers a unifying framework towards a global theory of comparative corporate governance, bridging the gap between economic theories of the firm and stakeholder theory, also offering an economics-based alternative to agency theory that explicitly accounts for stakeholder rights. The Coasian perspective encompasses a diversity of corporate governance systems, but does not imply a unique global corporate governance benchmark. We posit that governance is firm dependent and endogenous conditional on the constraints imposed by a national governance system; consequently, there should be no systematic relationship between governance and firm performance once the national constraints are controlled for. However, the same national corporate governance system constraints confer comparative advantages to firms whose efficient levels of firm-specific investments are favored.     

Why Do Firms in Customer–Supplier Relationships Hold More Cash?

A firm is in customer–supplier relationships when its business depends on a small number of major customers/suppliers. In this paper, we provide evidence that relationship‐specific investments undertaken by firms in customer–supplier relationships are associated with high cash holdings in these firms. The evidence is consistent with the prediction of Titman's stakeholder theory that a firm relying on relationship‐specific investments maintains a high cash reserve as a cushion to sustain its relationship‐specific investments when negative shocks occur. Our findings suggest that relationship‐specific investments are important determinants of the precautionary motive to hold cash.