The global business environment has become a space that allows many companies to exceedtheir limits; the dynamic internationalization of businesses, the expansion of companies from emerging ...economies, and especially of those from BRICS economies, the presence of multinational companies owned by the state are just some of the trends that shape the global businessenvironment today. In this study, based on the data synthesized by UNCTAD in the Top 100 nonfinancial MNEs from developing and transition economies, we aim to conduct a two-way analysisof the expansion of companies from the BRICS economies in the international businessenvironment. A research direction leads to the regional level, and another direction focuses on the sectoral level. The analysis carried out leads to a series of conclusions on the dynamics and configuration of the world's most important multinational companies from the BRICS economies.
There is an increasing awareness in international business that institutional factors need to be better incorporated into the understanding of international investments decisions of multinational ...companies. This applies equally to outward foreign direct investment by emerging economy firms. The intense renewal of interest in these ‘emerging multinationals’ over the last half decade or so has stimulated an increasing volume of contributions offering alternative theoretical perspectives, macro-level surveys of aggregate trends and case studies of firms and their strategies and operations. Not much has been suggested in terms of integrating various theoretical frameworks however and developing a more holistic understanding of these new investment flows. In this Editorial we propose that outward FDI from emerging economies can be better understood by analyzing them within a broad institutional framework of strategic fit. This theoretical approach may provide important insights concerning both the original impetus to the contemporary acceleration of these flows and their specific features. By building on the early literature on fit in strategic management we outline an institutional framework which considers flows of outward investment from emerging economies as framed by institutional pressures at the firm level towards achieving fit between the environment, strategies, structures, resources and practices of the firm. For the multinational firm this fit must be attained along multiple dimensions, domestically, abroad and in the global environment. We then proceed to interpret recent evidence on ‘emerging multinationals’, including the contributions in this special issue, in the context of this framework. We conclude with proposing promising areas of future research.
PurposeThe main aim of this paper is to verify whether the modern mainstream economic theory of multinational enterprise that explains foreign direct investment (FDI) from developed countries is also ...able to account for investment decisions of multinational enterprises (MNEs) from emerging economies.Design/methodology/approachUsing Knowledge-And-Physical-Capital (KAPC) model as an analytical framework and Poisson-pseudo maximum likelihood estimation technique, the authors identify determinants of FDI flows from emerging economies. The data set consists of 38 home and 134 host countries during the period 2000–2012. Empirical evidence supports high explanatory power of KAPC model. Further, compared with the earlier Knowledge-Capital (KC) model, results confirm the importance of physical capital.FindingsThe estimation results confirm the hypothesis that mainstream economic theory can explain FDI flows from the emerging economies by highlighting the roles of total market size, skilled-labor abundance, investment and trade costs and geographical distance between two countries.Research limitations/implicationsThis study casts doubt on the alternative way that the KAPC model suggests to distinguish between horizontal and vertical FDI. The argument that horizontal MNE headquarters would be relatively more abundant than vertical MNE headquarters in countries that are abundant in physical capital relative to skilled labor seems reasonable but the idea of variable specification in the estimated equation should be revised.Practical implicationsFirms should be allowed to move their resources freely into and out of specific activities, both internally and internationally across border. To reach that goal, governments of potential host countries can adopt several measures, most importantly remove restrictions on payments, transfers and capital transactions and open previously closed industries to welcome foreign investment. In addition, to improve investment climate in general, governments need to pay attention to enhancing security of property rights, regulating internal taxation (i.e. corporate income tax), guaranteeing adequacy of infrastructure, efficient functioning of finance and labor markets and fighting against corruption.Social implicationsThe location choice of emerging investors set priority on similarity in economic size, geographical and cultural proximity. It is because shared borders or common official languages would reduce information costs and enhance information flows. Also, investors consider horizontal FDI (with motivation to expand market demand) as one of main modes of entry into a foreign market and a substitute for export. Likewise, distance is often understood as an important investment friction.Originality/valueThe outstanding contribution is that the research has uncovered the positive and statistically significant effect of physical capital on FDI activity, which has not been discussed in the earlier KC model. However, at the same time, the study casts doubt on the KAPC model's argument that relative abundance in physical capital to skilled labor between two countries determines FDI types and suggests that this argument and its empirical model specification should be carefully reviewed.
Physical presence through establishment of subsidiary is one of the salient features of internationalization of Indian multinationals in the software services sector. However, closure of such ...subsidiaries has received limited limelight than the success stories. The paper examines the less explored event of international subsidiary closure using a representative sample of Indian software services multinationals and the associated subsidiaries closed during 2007-2017. Cox proportional hazard function is estimated using host-country, parent-firm and subsidiary-specific factors. Results show that the three levels of factors have significant impact on subsidiary closure. While economic growth in host country reduced probability of closure, the smaller subsidiaries and less profitable ones had higher probability of closure. Business group affiliation was found to have direct and independent impact on reducing probability of subsidiary closure. However, the liability of inter-regional foreignness due to higher geographical breadth of internationalization was not supported in the case of Indian software multinationals.
Purpose
Despite prior studies on cross-border acquisitions (CBAs) have analyzed the determinants of ownership strategies; there is still a quest for evidence on how the differences between home and ...host market characteristics affect the ownership percentage. Prior studies have acknowledged that entering host countries with greater uncertainty makes multinationals reluctant to acquire high levels of ownership. Nevertheless, emerging multinationals (EMNEs) are usually used to operating under greater levels of uncertainty than multinationals from advanced countries (AMNEs), which can imply different ownership strategies. The purpose of this study is to analyze the ownership percentage acquired by MNEs when designing a CBA in emerging or in advanced countries, and to analyze the extent to which the ownership strategy in emerging countries differs between EMNEs and AMNEs.
Design/methodology/approach
Mobile telecommunications industry is used as research setting to provide empirical evidence of the interaction effect of the advanced versus emerging nature of the host and home countries on the ownership acquired in CBAs.
Findings
Results confirm that both home and host countries' characteristics are relevant in explaining the ownership strategies of MNEs.
Originality/value
The authors contribute to the strategy and IB literatures by providing empirical evidence on the recent debate on whether the internationalization strategies followed by EMNEs are similar to the traditional patterns of AMNEs, and analyze how EMNEs differ from AMNEs in their ownership strategies in emerging countries. Focusing in the mobile telecommunications industry, the authors also contribute by extending the analysis to an international and cross-cultural setting that includes 48 mobile groups that come from 35 home and 81 host countries.
Purpose
– The purpose of this paper is to shed lights on both economic and social impacts associated to the increasing amount of western companies acquired by multinationals from emerging countries. ...Focussing on the Italian context, its main intent is to analyze changes in targets’ performance and capability to contribute to stakeholders’ wealth to assess the business and social viability of this type of deal.
Design/methodology/approach
– Operations of mergers and acquisitions (M & As) were identified through Zephyr (Bureau VanDijk’s database). Only acquisitions of a controlling interest were considered for a total of eight case studies. Financial Statements and Management Reports over a eight-year period have been analyzed to understand the rationale of the deal and to assess financial performance and company social impact before and after the merger.
Findings
– Results suggest that foreign investors mainly search for know-how and technical expertise and their arrival does not lead to better financial performance. Only one target records profits. Four companies are still controlled by Indian investors while the other four have been dismissed. Nevertheless Indian investors are not destroying profitable organizations as these were recording negative results already before the merger. With reference to value added distribution, acquisitions do not reduce local stakeholders’ wealth for the benefits of shareholders. Jobs are preserved and valued added is mainly distributed to employees. Great difficulties in achieving the expected value resulting from synergies emerge.
Research limitations/implications
– Observations emerging from this explorative study are limited to the case studies analyzed while it could be important to enlarge the number of companies to investigate, including targets acquired by Russian, Chinese and Brazilian investors. Moreover, additional information could be obtained from interviews with top managers to reveal how they interpret the merger’s success or failure. Also interviews with local stakeholders like suppliers, clients, representatives of employees and local institutions could be of great importance as they can help identify their specific point of view about the social and economic impact of foreign investors’ arrival.
Practical implications
– With reference to the public debate on the increasing number of European companies sold to foreign investors, research findings indicate that FDI from emerging economies do not necessarily lead to job losses or target’s closure. Indian investors are interested in brand, knowledge and other intangible assets (like Chinese ones). However they do not relocate production or expertise abroad. Some target companies record higher investments financed by the new shareholder, indicating that the arrival of new investors owing a large amount of money to invest in financial distressed Italian companies, can be beneficial to the local economy.
Originality/value
– Most literature studies M & As from the buyer’s perspective to assess if shareholders’ value is created (Tuch and O’Sullivan, 2007; Meglio, 2009; Dauber, 2012). On the contrary this research adopts the target’s and stakeholders’ perspective, in order to measure the value created and distributed to the territory. Moreover it focuses on unlisted companies, while most studies deal with publicly traded companies (Meglio and Risberg, 2010; Meglio and Risberg, 2012b). Lastly it enriches M & A mainstream literature, which usually adopts a positivistic mindset and rely on statistical analysis, by adopting a qualitative approach based on case study analysis.
Internationalization of emerging market multinationals is a recent phenomenon gaining importance in the global economy. This foreign expansion of a new breed of companies has challenged established ...theories and practices in the field of international business (Cuervo-Cazurra, 2007). This article addresses the issue of whether or not there is something to learn from these emerging market companies and their foreign expansion. Focusing on the international trajectories of four Brazilian multinationals (i.e., Odebrecht, Embraer, Stefanini, and Marcopolo), this study analyzes their strategies and managerial processes during and after the recent economic crisis with regards to internationalization. Our qualitative fieldwork suggests that the trajectories of these Brazilian multinationals are quite unstructured and evolve as a reaction to the opportunities they face in international markets. It seems all four companies in our sample shared a strong entrepreneurial spirit and a high motivation to expand their international operations despite the crisis and the obstacles they faced. Our findings and suggestions in terms of lessons learned should provide valuable implications for multinational managers from other emerging markets by providing a better understanding of how Brazilian multinationals expand internationally, deal with economic crisis, and manage relationships with local and foreign institutions.
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