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.     

The Effect of Cross‐Border Mergers and Acquisitions on Earnings Quality: Evidence from China

Despite the fruitful research on the motives and outcomes of cross‐border mergers and acquisitions (M&As) of Chinese multinational corporations (MNCs), there has been scant research on the impact of cross‐border M&As on corporate governance. In this article, we fill the research gap by exploring whether cross‐border M&As may lead to an improvement in corporate governance of Chinese acquirers. In particular, we examine the impact of cross‐border M&As on earnings quality of Chinese MNCs. We find that the acquisition of a target firm from a developed country leads to a significant improvement on the acquirer's earnings quality. In comparison, the acquisition of a target from an emerging market does not have such an impact. Our results are robust to various corporate governance measures, alternative econometric methods, and controls of relevant firm characteristics and macroeconomic variables. Finally, we show that the effect of cross‐border M&As on earnings quality is more pronounced in non‐state‐owned enterprises (non‐SOEs) that have conducted large M&A deals. Our article offers new insight to the international business literature on latecomer perspective and liability of foreignness. © 2016 Wiley Periodicals, Inc.     

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.     

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.     

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.     

Defying Distance? Cross‐Border Acquisitions by Emerging‐Economy Firms

We argue that emerging‐economy firms’ international location choices are driven by the pursuit of dynamic efficiency rather than the immediate minimization of transaction and learning costs, and hence the relationship between country distance and the number of cross‐border acquisitions will be less negative for these firms relative to advanced‐economy firms. We then test the hypothesis with respect to four measures of country distance—geographic, economic, cultural, and institutional—and find support for the hypothesis. Our study provides empirical support for claims in the literature about differences in the international expansion behavior of emerging‐economy firms with respect to location. In addition, our study makes a theoretical contribution by showing that the theoretical perspective of dynamic efficiency can explain the difference in the location choices for cross‐border acquisitions by emerging‐economy firms relative to those by advanced‐economy firms. © 2016 Wiley Periodicals, Inc..     

Cross‐border expansion and competitive interactions of indigenous mobile network operators in sub‐Saharan Africa

Emerging‐market multinational enterprises (EMNEs) have become major players in the global economy, with an increasing share of global foreign direct investment (FDI). Indigenous mobile network operators (MNOs) in sub‐Saharan Africa (SSA) are not left out in this pursuit, as they seek growth and competitiveness beyond their domestic markets. We investigate the FDI location choices and competitive interactions of the five indigenous SSA MNOs that had internationalized as of 2014 and find that, contrary to the literature, these EMNEs, operating in a key and rapidly developing industry, did not tend to commence their cross‐border expansion in geographically close markets. In addition, the MNOs are more likely to invest in countries with stronger control over corruption and do not appear to engage in heavy head‐to‐head competition with their rivals. These findings contribute to the internationalization literature in the context of the investment and competitive behaviors of the currently underexplored indigenous SSA multinationals.     

Partial or total integration in a cross‐border merger? Building a Nordic bank culture

The rate of failure for international mergers and acquisitions (M&As) is exceptionally high, since the integration of merging firms does not function well. Using a process perspective, this study aims to analyze the integration process in a cross‐border merger and the development of a common organizational culture. A framework based on premerger cultural and organizational fit, synergy, and resulting organizational culture is developed to study the growth of Nordea, a merger of four Nordic banks. Data include in‐depth interviews and secondary sources. This case study shows how cultural and managerial differences are dealt with and synergies realized. Building a broad organizational culture involving human resource management, decision making, technology, competitiveness, and customer relationships is necessary for merger integration, but it is costly and difficult. We suggest that success in mergers lies in managers creating a new cultural identity with unique values and perspectives.     

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.     

Unpacking Institutional Distance: Addressing Human Capital Development and Emerging‐Market Firms’ Ownership Strategy in an Advanced Economy

As latecomers to global business competition, emerging‐market multinational companies (EMNCs) utilize cross‐border mergers and acquisitions (M&As) to quickly acquire strategic assets, resulting in an improved competitive position. Advanced markets with well‐established firms and well‐developed market‐supporting institutions become particularly important destinations for EMNCs’ foreign operations. Institutional distance, which represents conflicting legitimacy requirements between the host and home institutional environments, is expected to be negatively associated with the foreign acquirer's ownership position. The current study examines a sample of EMNCs’ cross‐border M&As in the United States between 2005 and 2011 and reveals the unique nature of EMNCs’ ownership strategies. Taking both formal and informal institutions into consideration, our findings suggest that EMNCs originating in countries with lower levels of human capital development may have more urgency in seeking ownership control in advanced markets and are less influenced by the negative association of institutional distance in their ownership strategy. © 2016 Wiley Periodicals, Inc.     

Cross‐border M&As by Chinese firms: An analysis of strategic motives and performance

This article considers the strategic motivation and performance of Chinese cross‐border mergerand‐ acquisition (M&A) activities of 27 deals that took place in the Shanghai and Shenzhen stock markets in 2000–2004. The study finds that cross‐border M&As formation by Chinese firms are primarily motivated by market development (that is, increasing market share) to enable faster entry into new markets, promote diversification, and obtain foreign advanced technology and other resources. In terms of wealth creation, the study finds that cross‐border M&As create value for Chinese acquiring firms. © 2008 Wiley Periodicals, Inc.     

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.     

Impact of the Financial Crisis on Cross‐Border Mergers and Acquisitions and Concentration in the Global Banking Industry

The global banking industry has seen dramatic changes in the past 40 years. Most recently, the financial liberalization of emerging markets and the global financial crisis have significantly impacted the market share of banks worldwide. This article investigates the impact of the 2007–2008 financial crisis on cross‐border mergers and acquisitions (M&As) in the banking sector and emphasizes the role of emerging‐market banks in the postcrisis consolidation trend. Using M&A data and concentration data over the period 2000–2013, our analysis indicates that the financial crisis had a significant impact on worldwide M&As, especially on the direction of the transactions. Emerging‐market banks appear to be major acquirers in the postcrisis period, targeting both neighboring countries and developed economies in Europe. We also observe an increase in bank concentration in developed markets most hit by the financial crisis, especially in the United States and the United Kingdom, whereas bank concentration decreased in emerging markets. © 2015 Wiley Periodicals, Inc.     

A co-evolution perspective of EMNE internationalization and institutions: An integrative framework of 5Cs

While significant progress has been made on the contextual role of institutions, scholarly research on the dynamic process of emerging economy multinational enterprises’ (EMNEs) international activities interacting with home country and host country institutions still seems to be in its infancy. Therefore, in order to move the current academic debate forward, we examine the intersection between the internationalization of EMNEs and their institutional environments by undertaking a critical review of the existing literature, given that institutional forces not only shape organizational behavior but also affect EMNEs’ internationalization strategies and organizational outcomes. We propose an integrative framework of 5Cs (context, capability, change, concomitance and configuration) underlying the co-evolution of EMNEs’ internationalization and institutions, and position all the papers included in this Special Issue within this framework in order to point towards a number of directions for future scholarship.     

Dismantling institutional complexity behind international competitiveness of emerging market firms

The paper examines the perceived role of emerging market institutions in the creation of firm‐specific advantages of local small‐ and medium‐sized enterprises (SMEs) supporting international expansion and competitiveness. Our objective is to deepen conceptual understanding of the complex link between emerging market institutional factors and an ability of emerging market SMEs to compete internationally. Our empirical evidence from Russian software SMEs operating in global niche markets reveals that managers perceive institutional influence on their firms' ability to compete internationally in a number of direct and indirect means. We find that, in addition to the well acknowledged negative impact of institutions, there are supportive and triggering forces that incentivize SMEs' international expansion and development of competitive advantages. We contribute to the literature by elaborating about the complexity of institutional influence on international competitiveness of emerging market SMEs. This research offers insights for managers about the prospects of international expansion of SMEs from emerging markets.     

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.     

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.     

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.