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Summary Theories of International Management articles week 6
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Week 6International expansion of emerging market enterprises: A
springboard perspective (2007)
Yadong Luo & Rosalie Tung
EM MNEs use outward investments as a springboard to acquire strategic
assets needed to compete more effectively against global rivals and to
avoid the institutional and market constraints they face at home. Their
'spring- board' behaviours are often characterized by overcoming their
latecomer disadvantage in the global stage via a series of aggressive, risk-
taking measures by proactively acquiring or buying critical assets from
mature MNEs to compensate for their competitive weaknesses.
By developing a springboard perspective for EM MNEs, we do not
imply that existing MNE theories are incapable of explaining behaviours of
EMMNEs. Ex. Dunning's eclectic paradigm is still relevant to the extent
that EM MNEs expand internationally, in search of location-specific
advantages by leveraging their unique capabilities. Similarly, although EM
MNEs do not necessarily follow the incremental approach in
internationalization, they still attend carefully to the importance of
organizational learning and global experience, the central thesis of the
evolutionary process theory.
Emerging Market MNEs (EM MNEs) international companies
that originated from emerging markets
and are engaged in outward FDI, where they
exercise effective control and undertake
value-adding activities in one or more
foreign countries.
EM MNEs do NOT include:
o Emerging import/export companies; because they do not engage in
outward FDI
o Firms involved in minority joint venture relation overseas; since they
do not effectively control the subunits.
o Enterprises that invest mainly or exclusively in tax-haven countries
(ex. Cayman and Virgin Islands) for the primary purpose of taxation
evasion or reverse/ 'round-tripping' investments (i.e., using their own
money under a 'foreign' subsidiary name to invest back at home to
obtain preferential treatment by the home government), because
they do not engage in value-adding activities overseas.
o State-owned enterprises whose roles are to completely pursue
political objectives designated by their respective home
governments (i.e., they do not compete in international markets for
optimizing corporate returns).
Emerging markets Countries whose national economies have grown
rapidly, where industries have undergone/are
undergoing dramatic structural changes, and whose
markets hold promise despite volatile and weak
legal systems.
, We focus on MNEs from major emerging markets (China, India, Brazil,
Russia, Mexico, Poland, Ukraine, Thailand, South Africa, Chile, Argentina,
Turkey and Malaysia).
However, our results are also applicable for smaller emerging markets
since, even though they did not really reached a considerable level of
internationalization. We do not focus on newly industrialized economies
(NIEs) MNEs.
Types of EM MNEs
Based on ownership and
the level of international
diversification (i.e., the
breadth of geographical
coverage of international
markets through outward
investment)
Niche Entrepreneur
These are non-stated owned MNEs, whose geographical and product
coverage in international markets is narrowly focused, and they do not
receive government funding nor possess rich industrial experience. They
focus on a narrow line of products/markets to leverage their strengths (ex.
China’s ZTE, handset producer built a production facility in Dallas to focus
on North America).
World-Stage Aspirant
These are non-stated owned MNEs that are relatively diversified in their
product offerings and geographical coverage in the international market
place. Ex. India's Tata Group (that country's largest private company,
operating in more than 40 countries across six continents). Although they
have not yet reached the scale and scope of internationalization of big
MNEs from advanced markets, these world-stage aspirants have become a
formidable force in shaping the landscape of global competition where
cost advantages are critical. These pertain to products that are mass-
manufactured and technologically mature (ex. Lenovo, but this is partly
state-owned; so between world-stage aspirant and transnational agents).
Transnational Agents
These are state-owned MNEs that have invested extensively abroad for
their business expansion, while still being subject to home government
instructions/influences. Ex. India's Hindustan Petroleum Co. Ltd. (HPCL)
and Oil & Natural Gas Corp. (ONGC). These agents generally operate in
vital sectors that are of strategic importance to their respective countries.
As such, their governments are usually their largest shareholders. They
have gone global to seize opportunities presented by a better investment
climate to foster overall business growth while supporting economic
development at home.
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